Color Line decision - EFTA Surveillance Authority

Transcription

Case No: 59120
Event No: 587334
Dec. No: 387/11/COL
Non-confidential version [626584]
EFTA SURVEILLANCE AUTHORITY DECISION
of 14 December 2011
Relating to proceedings pursuant to Articles 53 and 54 of the EEA Agreement
Case No. 59120 Color Line
Strictly Confidential
TABLE OF CONTENTS
1
INTRODUCTION ............................................................................................................................ 6
2
THE PROCEDURE .......................................................................................................................... 6
3
THE FACTS ...................................................................................................................................... 9
3.1
COLOR LINE .............................................................................................................................. 9
3.2
THE MUNICIPALITY OF STRÖMSTAD ..................................................................................... 12
3.3
AGREEMENTS CONCLUDED BETWEEN COLOR LINE AND THE MUNICIPALITY OF
STRÖMSTAD .......................................................................................................................................... 13
3.4
THE SANDEFJORD – STRÖMSTAD ROUTE .............................................................................. 15
3.4.1 The passengers on the route .............................................................................................. 16
3.4.2 The importance of tax-free shopping ................................................................................ 17
3.4.3 Tonnage and number of sailings per day.......................................................................... 19
3.4.4 Turnover, gross margins and increase in demand ........................................................... 19
3.5
COLOR LINE’S INVESTMENTS IN THE SANDEFJORD – STRÖMSTAD ROUTE ........................ 21
3.5.1 Color Line’s investments in Strömstad ............................................................................. 21
3.5.2 Color Line’s investments in Sandefjord ............................................................................ 22
3.5.3 Color Line’s investments in tonnage ................................................................................. 22
3.5.4 Other investments ............................................................................................................... 23
3.6
THE APPLICABLE TAX-FREE REGIME ..................................................................................... 23
3.6.1 General framework ............................................................................................................. 23
3.6.2 Tax-free sales on ferry routes between the Nordic countries .......................................... 24
3.6.2.1
Prior to 1 June 2002 .................................................................................................... 24
3.6.2.2
Post-1 June 2002 ......................................................................................................... 27
4
THE RELEVANT MARKET ....................................................................................................... 28
4.1
4.2
4.3
4.4
5
INTRODUCTION ........................................................................................................................ 28
THE RELEVANT MARKET FOR PASSENGER SERVICES ........................................................... 29
COLOR LINE’S SUBMISSIONS ON MARKET DEFINITION ........................................................ 33
CONCLUSION ON THE RELEVANT MARKET ............................................................................ 35
ARTICLE 53(1) EEA ..................................................................................................................... 36
5.1
INTRODUCTION ........................................................................................................................ 36
5.2
JURISDICTION .......................................................................................................................... 36
5.3
AGREEMENT BETWEEN UNDERTAKINGS................................................................................ 37
5.4
RESTRICTION OF COMPETITION ............................................................................................. 39
5.4.1 Introduction ........................................................................................................................ 39
5.4.2 The restrictions resulting from the harbour agreement in Strömstad ............................ 41
5.4.3 Color Line’s market position and barriers to entry .......................................................... 42
5.4.4 Attempts at new entry and Color Line’s response thereto ............................................... 45
5.4.5 Assessment of harbour alternatives ................................................................................... 51
5.4.5.1
Introductory remarks .................................................................................................. 51
5.4.5.2
The Port of Strömstad ................................................................................................. 51
5.4.5.2.1 The Myren and Abba-piren area ........................................................................... 52
5.4.5.2.2 Color Line’s arguments regarding the Port of Strömstad .................................... 54
5.4.5.2.3 Conclusion on the port of Strömstad ..................................................................... 60
5.4.5.3
Kålvik..........................................................................................................................60
5.4.5.3.1 Introduction ............................................................................................................ 60
5.4.5.3.2 The situation prior to the adoption of the in-depth general plan in October 2003 ..
................................................................................................................................ 62
2
5.4.5.3.3 The situation after the adoption of the in-depth general plan in October 2003
until the end of 2005 ................................................................................................................ 67
5.4.5.3.4 Road access to Kålvik and Nordby ........................................................................ 69
5.4.5.3.5 Conclusion on regulatory obstacles and uncertainties ......................................... 70
5.4.5.3.6 The attractiveness of Kålvik as a destination during the relevant period ............ 71
5.4.5.3.7 Recent developments at Kålvik .............................................................................. 74
5.4.5.3.8 Conclusion on Kålvik ............................................................................................. 77
5.4.5.4
Lysekil ........................................................................................................................77
5.4.5.4.1 Assessment of Lysekil as a harbour alternative .................................................... 77
5.4.5.4.2 Color Line’s arguments regarding Lysekil............................................................ 80
5.4.5.4.3 Conclusion on Lysekil ............................................................................................ 83
5.4.5.5
Other harbours ............................................................................................................ 83
5.4.5.6
Conclusion on harbour alternatives............................................................................ 84
5.4.6 Capacity at Torskholmen ................................................................................................... 84
5.4.6.1
Color Line’s right of expansion argument ................................................................. 85
5.4.6.2
Color Line: there was no spare capacity for a new entrant ....................................... 86
5.4.6.3
Color Line: capacity constraints led the Municipality to reject applications for
harbour access .............................................................................................................................. 89
5.4.6.4
The relevance of the Bronner case ............................................................................. 90
5.4.6.5
Conclusion on the capacity at Torskholmen .............................................................. 90
5.4.7 The extent to which the Municipality of Strömstad considered itself bound by the
exclusivity ......................................................................................................................................... 91
5.4.7.1
The circular nature of Color Line’s argument ........................................................... 91
5.4.7.2
Color Line’s arguments lack support in the available facts ...................................... 91
5.4.7.3
Color Line actively invoked its exclusivity with a view to preventing Kystlink from
obtaining access to Torskholmen and entering the relevant market ........................................... 93
5.4.7.4
Conclusion ..................................................................................................................98
5.4.8 The tax-free regime prior to 1 June 2002 ......................................................................... 98
5.4.9 Counter-factual .................................................................................................................103
5.4.10 Color Line’s harbour agreements with Norwegian ports ..............................................105
5.4.11 Conclusion on the restrictive effects of the harbour agreement ...................................107
5.5
EFFECT ON TRADE BETWEEN CONTRACTING PARTIES ......................................................107
5.6
CONCLUSION ON ARTICLE 53(1) EEA .................................................................................108
6
ARTICLE 53(3) EEA ...................................................................................................................108
6.1
INTRODUCTION ......................................................................................................................108
6.2
COLOR LINE’S SUBMISSIONS ................................................................................................111
6.2.1 First and second conditions: improvement in the production or distribution of goods /
promotion of technical or economic progress; benefit to consumers .........................................111
6.2.2 Third condition: indispensability .....................................................................................113
6.2.3 Fourth condition: elimination of competition ................................................................114
6.3
ASSESSMENT OF COLOR LINE’S SUBMISSIONS ....................................................................115
6.3.1 First condition: improvement in the production or distribution of goods / promotion of
technical or economic progress .....................................................................................................115
6.3.2 Second condition: benefit to consumers .........................................................................117
6.3.3 Third condition: indispensability .....................................................................................118
6.3.4 Fourth condition: elimination of competition ................................................................122
6.4
CONCLUSION ON ARTICLE 53(3) EEA .................................................................................123
7
ARTICLE 54 EEA ........................................................................................................................123
7.1
JURISDICTION ........................................................................................................................124
7.2
COLOR LINE AS A DOMINANT UNDERTAKING .....................................................................124
7.2.1 Color Line’s submissions regarding dominance ............................................................126
3
7.2.2 Assessment of Color Line’s submissions regarding dominance ...................................126
7.2.3 Conclusion on dominance................................................................................................127
7.3
ABUSE OF DOMINANCE ..........................................................................................................127
7.3.1 The concept of abuse ........................................................................................................127
7.3.2 Color Line’s conduct was capable of restricting competition on the relevant market .129
7.3.3 Color Line’s submissions regarding the finding of abuse .............................................130
7.3.4 Assessment of Color Line’s submissions regarding the finding of abuse ....................131
7.3.5 Conclusion ........................................................................................................................134
7.3.6 Objective justification .......................................................................................................134
7.3.7 Conclusion on the abuse assessment...............................................................................136
7.4
EFFECT ON TRADE BETWEEN CONTRACTING PARTIES ......................................................136
7.5
CONCLUSION ON ARTICLE 54 EEA .....................................................................................137
8
DURATION OF THE INFRINGEMENT .................................................................................137
9
CONCLUSION ON THE INFRINGEMENT OF ARTICLES 53 AND 54 EEA .................137
10
LIABILITY FOR THE INFRINGEMENT AND ADDRESSEES OF THE DECISION ....138
11
REMEDIES AND FINES ............................................................................................................141
11.1
ARTICLE 7 OF CHAPTER II OF PROTOCOL 4 TO THE SURVEILLANCE AND COURT
AGREEMENT........................................................................................................................................141
11.2
ARTICLE 23(2) OF CHAPTER II OF PROTOCOL 4 TO THE SURVEILLANCE AND COURT
AGREEMENT........................................................................................................................................142
11.3
THE BASIC AMOUNT OF THE FINE .........................................................................................144
11.3.1 Calculation of the value of sales ......................................................................................144
11.3.2 Determination of the basic amount of the fine ...............................................................144
11.3.2.1 Gravity ......................................................................................................................144
11.3.2.1.1 Nature of the infringement ...................................................................................145
11.3.2.1.2 Market share ........................................................................................................145
11.3.2.1.3 Geographical scope of the infringement .............................................................145
11.3.2.1.4 Conclusion on gravity ..........................................................................................145
11.3.2.2 Duration ....................................................................................................................145
11.3.3 Conclusion on the basic amount of the fine ...................................................................146
11.4
MITIGATING CIRCUMSTANCES .............................................................................................146
11.5
AGGRAVATING CIRCUMSTANCES .........................................................................................146
11.6
CONCLUSION .........................................................................................................................147
4
THE EFTA SURVEILLANCE AUTHORITY,
HAVING REGARD to the Agreement on the European Economic Area,
HAVING REGARD to Chapter II of Protocol 4 to the Agreement between the EFTA
States on the Establishment of a Surveillance Authority and a Court of Justice on the
general procedural rules implementing Articles 53 and 54 of the EEA Agreement, and
in particular Article 7 and Article 23(2) thereof,
HAVING given the undertakings concerned the opportunity to make known their
views on the objections raised by the Authority pursuant to Article 27(1) of Chapter II
and Article 12 of Chapter III of Protocol 4 to the Agreement between the EFTA States
on the Establishment of a Surveillance Authority and a Court of Justice,
AFTER consulting the Advisory Committee on Restrictive Practices and Dominant
Positions,
HAVING REGARD to the final report of the hearing officer,
WHEREAS:
5
1
INTRODUCTION
1.
This Decision concerns an agreement entered into between Color Line AS
(“Color Line”, at the time Scandi Line AS) and the Municipality of Strömstad
dated 26 March 1991, concerning access to Torskholmen in Strömstad harbour
in Sweden.
2.
That agreement contained terms that prevented the Municipality of Strömstad
from granting access to harbour facilities to other ferry companies. The
agreement granted long-term exclusivity to Color Line for the use of
Torskholmen in Strömstad harbour for a total period of 25 years, initially for a
period of 15 years, with an entitlement to a 10-year extension.
3.
On the basis of its market investigation, the EFTA Surveillance Authority (the
“Authority”) has concluded that the long-term exclusive harbour agreement
infringed both Article 53 and Article 54 of the EEA Agreement. The
infringement addressed in this Decision covers the period from 1 January 1994
to 20 December 2005 (referred to herein as “the period under examination” or
“the relevant period” as the case may be).
4.
The Authority has defined the relevant market on which competition was
restricted as the market for short-haul passenger ferry services with tax-free
sales on which Color Line was the sole operator during the period under
examination in this Decision with its route between Sandefjord, Norway, and
Strömstad, Sweden. The harbour agreement prevented potential competitors
from obtaining access to Strömstad harbour and, as a result, protected Color
Line against effective competition contrary to Article 53(1) EEA. The Authority
considers that Color Line has not shown that the harbour agreement fulfilled the
conditions in Article 53(3) EEA.
5.
The Authority also concludes that Color Line was in a dominant position on the
relevant market and that the long-term exclusive rights enjoyed by Color Line
pursuant to the harbour agreement were capable of restricting competition. The
Authority further concludes that Color Line has not shown that there was an
objective justification for maintaining its exclusive rights in force from 1
January 1994 until 20 December 2005, and that it therefore abused its dominant
position on the relevant market within the meaning of Article 54 EEA.
6.
The Authority considers that it is necessary to impose a fine in the present case.
The Authority has fixed the amount of the fine to be imposed on Color Line at
EUR 18.811 million.
2
THE PROCEDURE
7.
Kystlink AS contacted the Norwegian Competition Authority in the autumn of
2005, and subsequently lodged a complaint1 with the Norwegian Competition
Authority on 20 December 2005, concerning agreements entered into and
practices engaged in by Color Line. In November 2003, Kystlink AS had begun
1
Event # 356797.
6
co-operating with a subsidiary of Glittertind AB, Rederi AB Utrikes Linjer
(“RAUL”), with a view to establishing a passenger ferry service from Norway
to Strömstad. Kystlink AS bought 49% of the shares in RAUL in March 2004
and the remaining 51% in May 2005.
8.
On 14 December 2005, the Norwegian Competition Authority, on the basis of
information obtained from Kystlink in meetings, notified the Authority of the
case pursuant to Article 11(3) of Chapter II of Protocol 4 to the Agreement
between the EFTA States on the Establishment of a Surveillance Authority and
a Court of Justice (the “Surveillance and Court Agreement”).2
9.
Following discussions with the Norwegian Competition Authority, it was
decided that the case should be reallocated to the Authority pursuant to the rules
set out in the EFTA network notice.3
10.
From 4 to 6 April 2006, the Authority carried out inspections at the premises of
Color Line AS, Color Group ASA and O.N. Sunde AS in Oslo, Norway.
Subsequently, the Authority and the parties held various meetings and
exchanged correspondence. The Authority also sent requests for information to
several other undertakings in the course of the investigation.
11.
Kystlink AS ran into financial problems in late 2005 and was formally declared
bankrupt in May 2006. In December 2005, Torggaten 13 AS bought the
activities and assets of Kystlink AS. Torggaten 13 AS subsequently changed its
name to Nye Kystlink AS.4 Following the bankruptcy of Kystlink AS, Nye
Kystlink AS confirmed that it wished to pursue the complaint before the
Authority.5 In November 2006, Nye Kystlink commenced a passenger ferry
service from Langesund in Norway to Strömstad, which was in operation until
November 2008.
12.
On 16 December 2009, the Authority notified a Statement of Objections (SO) in
English to Color Line. Following a request from Color Line on 17 December
2009,6 a Norwegian version of the SO was prepared and was notified to Color
Line on 5 February 2010.7 The Authority took the preliminary view that the
undertakings to which the SO was addressed had infringed Articles 53 and 54 of
the EEA Agreement.
2
Event # 356345, notification under Article 11(3) of Chapter II of Protocol 4 to the Surveillance and
Court Agreement. An updated notification was received on 9 February 2006 (event # 362266).
3
Event # 365839, Notice on Cooperation within the EFTA Network of Competition Authorities, OJ C
227, 21.9.2006, p.10 and EEA Supplement to the OJ No 47, 21.9.2006, p. 1.
4
Unless otherwise specified, any reference to “Kystlink” in this Decision will include Kystlink AS,
Nye Kystlink AS and RAUL.
5
Event # 411514, letter from Nye Kystlink dated 18 January 2007.
6
Event # 540485.
7
Event # 545617.
7
13.
On 12 April 2010, Color Line submitted its Reply to the SO in Norwegian8 and
requested that the language of the proceedings before the Authority be
Norwegian.9
14.
On 29 January 2010, Fjord Line AS, a ferry company in competition with Color
Line on another ferry route, sought leave to intervene in the proceedings.10 The
Hearing Officer granted that request on 9 February 2010.11 On 12 May 2010,
Bastø-Fosen AS, a company operating a ferry route between the Norwegian
cities of Moss and Horten, also requested leave to intervene.12 The Hearing
Officer granted that request on 18 May 2010.13
15.
In application of Articles 6(1) and 13 of Chapter III of Protocol 4 to the
Surveillance and Court Agreement, the Authority provided Fjord Line AS and
Bastø-Fosen AS with a copy of the non-confidential version of the SO on 29
March and 19 May 2010 respectively.14 The Authority also provided both
companies with a copy of the non-confidential version of Color Line’s Reply to
the SO, on 23 April 2010 and 19 May 2010 respectively.15 Both of those
companies made their views known in writing, on 21 May 201016 and 3 June
201017 respectively.
16.
At Color Line’s request, an oral hearing was held, in the Norwegian language,
on 14 June 2010. Bastø-Fosen AS also participated at the oral hearing.
17.
On 15 February 2011, at Color Line’s request, a state of play meeting was held
by the Authority.18 A further meeting with Color Line took place, at its request,
on 11 May 2011, prior to which, on 6 May 2011, Color Line submitted a
position paper.19
8
Event # 553056, reply dated 12 April 2010.
9
Event # 553010, cover letter to Color Line’s Reply to the SO. Quotes in English in this Decision
taken from Color Line’s Reply to the SO are taken from the translation of that Reply commissioned by
the Authority.
10
Event # 544803, letter from Fjord Line dated 29 January 2010.
11
Event # 545972, letter from the Hearing Officer to Fjord Line.
12
Event # 557376, letter from Bastø-Fosen’s legal counsel dated 12 May 2010.
13
Event # 557718, letter from the Hearing Officer to Bastø-Fosen dated 18 May 2010.
14
Event # 551778 and event # 557795.
15
Event # 554680 and event # 557795.
16
Event # 558536, letter from Fjord Line dated 21 May 2010. The letter was sent to Color Line by email (event # 558567) on 26 May 2011. On 27 May 2011, Fjord Line submitted certain amendments to
its comments (event # 558801), which were forwarded to Color Line the same day (event # 558800).
17
Event # 559296, e-mail with attachments from Bastø-Fosen dated 3 June 2010; sent to Color Line on
4 June 2010 (event # 559327).
18
Commission Notice on Best Practices for the conduct of proceedings concerning Articles 101 and
102 TFEU (OJ C 308, 20.10.2011), p. 15.
19
Event # 599365, position paper from Color Line dated 6 May 2011.
8
3
THE FACTS
3.1
Color Line
18.
O.N. Sunde AS is an investment company active in the shipping business,
tourism, chemicals, clothing distribution, sport and leisure, property and
financial investments. Its ferry activities are handled by Color Group AS
(previously Color Group ASA and before that Color Line ASA). Color Group
AS has activities in the transport of passengers and goods, hotels, restaurants
and organised tours. During the period under examination, ferry services on the
Sandefjord – Strömstad route were handled by Color Line AS (and its
predecessors). Color Line AS is a wholly-owned subsidiary of Color Group AS,
which is in turn 100% owned by O.N. Sunde AS.
19.
In 2010, O.N. Sunde AS’s worldwide turnover was EUR 1271 million. Color
Group AS had worldwide turnover of EUR 563 million.20
20.
The Sandefjord – Strömstad route was started in 1986 by the company Scandi
Line AS. On 1 June 1994, Scandi Line AS was dissolved, and its activities were
transferred to a newly established company also named Scandi Line AS, wholly
owned by the publicly listed company Larvik Scandi Line AS.
21.
Scandi Line AS remained the operating company on the route until 2000.
However, as explained below, ownership and control of the company changed
significantly throughout the period from 1994 to 2000.
22.
O.N. Sunde AS gradually acquired all of the shares in Larvik Scandi Line AS,
and by December 1996 had acquired a 100% shareholding in the company. At
that time, Scandi Line AS, the operating company on the route, also became a
wholly owned subsidiary of O.N. Sunde AS.
23.
By December 1997, Larvik Scandi Line AS had acquired a 52% shareholding in
Color Line ASA. By the end of 1998, that shareholding had increased to 77%.
24.
In 1998, the group of companies was reorganized, and Larvik Scandi Line AS
created Skagerak Line AS as a parent company (without turnover) of Scandi
Line AS, Larvik Line AS, Color Air AS and Hotel Skagen AS. Thus, until 30
September 1998, the group had the following structure.
20
Event # 600018, reply from Color Line dated 1 June 2011. Exchange rate 2010, 1 Euro: NOK
8.0043; source ECB.
9
(Source: Color Line’s reply of 4 December 2006, event # 401814)
25.
Thus, O. N. Sunde AS controlled 100% of Larvik Scandi Line AS which in turn
controlled 77% of Color Line ASA. Larvik Scandi Line AS also owned 100%
of Skagerak Line AS which in turn controlled 100% of Scandi Line AS, the
operating company on the Sandefjord – Strömstad route.
26.
On 30 September 1998, the group implemented an internal re-organisation:
Color Line ASA acquired 100% of the shares in Skagerak Line AS; Color Line
ASA changed its name to Color Group ASA, and became a holding company in
charge of the central administration of the group; Skagerak Line AS changed its
name to Color Line AS; and Scandi Line AS changed its name to Color Scandi
Line AS.21
21
Event # 401814, reply from Color Line dated 4 December 2006, and event # 401820, annex 3.
10
(Source: Color Line’s reply of 4 December 2006, event # 401814)22
27.
After that reorganisation, the company operating the Sandefjord – Strömstad
route at that time – then called Color Scandi Line AS – became a wholly owned
subsidiary of Color Group ASA through its wholly owned subsidiary Color Line
AS.
28.
Larvik Scandi Line AS continued to hold the bulk of the shares in Color Group
ASA (77%). O.N. Sunde AS still held 100% of the shares in Larvik Scandi Line
AS. O.N. Sunde AS’s share in the operating company on the Sandefjord –
Strömstad route was therefore reduced to 77% (by virtue of its 100%
shareholding in Larvik Scandi Line AS) from 30 September 1998.
29.
Finally, also in 1998, Larvik Scandi Line AS was absorbed by O.N. Sunde AS.
30.
In December 1999, O.N. Sunde AS acquired approximately 100% of all
outstanding shares in Color Group ASA,23 at which time the operating company
(then Color Scandi Line AS) again came under O.N. Sunde AS’s full control.
31.
In 2000, Color Scandi Line AS was absorbed by Color Line AS. From 2000,
Color Line AS was the operating company on the Sandefjord to Strömstad
route, and the company group had the following structure.
22
The Authority notes that the reference to “Scandi Line AS” in this organigram, provided by Color
Line, should be to “Color Scandi Line AS”.
23
Event # 401814, p. 4, reply from Color Line dated 4 December 2006.
11
(Source: Color Line’s reply of 4 December 2006, event # 401814)
32.
That structure remained in place until 2007, when the group was reorganised. In
2007, the group announced a reorganisation involving the de-merger of Color
Line AS into three separate limited companies, focussing on cargo, cruise and
transport respectively, with Color Line AS remaining as the holding company.
The cruise division would be in charge of Color Line’s overnight routes,
whereas shorter routes without night sailings, including the Sandefjord –
Strömstad route, would be run by the transport division, Color Line Transport
AS.24 On March 25 2010, Color Group ASA became a limited company
(Aksjeselskap), thus becoming Color Group AS.25
33.
In this Decision, references to Color Line include the Color Line group of
companies where relevant.
3.2
The Municipality of Strömstad
34.
Strömstad is a town in Bohuslän in South West Sweden close to the Norwegian
border. The harbour of Strömstad is owned by the Municipality of Strömstad. It
is managed and operated by a Technical Board,26 which answers to the
Municipal Assembly. The Municipal Assembly adopts the harbour regulations
and the harbour taxes. Harbour fees are determined by the Municipal Assembly
based on suggestions from the Technical Board, and are set on the basis of costs
incurred and market conditions.27 Important decisions on harbour activities and
financing are taken by the Municipal Assembly, whereas the day-to-day activity
is managed by the Harbour Director and the Technical Board.28
24
Color Line’s Annual Report for 2007, available at:
http://www.colorline.no/polopoly_fs/1.2796!/cg_com_2007.pdf.
25
Event # 600018, reply from Color Line dated 1 June 2011.
26
The Technical Board was first called the Harbour Board (“Hamnstyrelsen”), and subsequently the
Environment Board (“Miljönämnden”), before changing its name to the Technical Board.
27
Event # 408737, reply (to question 5) of the Municipality of Strömstad dated 22 January 2007.
28
Event # 408737, reply from the Municipality of Strömstad dated 22 January 2007.
12
35.
The Municipality of Strömstad’s total turnover from commercial activities in
2005 was EUR 8.7 million. Income from the harbour amounted to EUR 2.3
million, of which EUR 1.8 million was generated from Color Line.29
3.3
Agreements concluded between Color Line and the Municipality of
Strömstad
36.
Color Line and its predecessors have operated passenger ferry services on the
Sandefjord – Strömstad route since 1986. During the initial years, it appears that
there was no written agreement between the ferry operator and the Municipality
of Strömstad. In 1989, Color Line’s predecessor, Scandi Line AS, entered into
an agreement with the Municipality of Strömstad.30 The agreement was for a
four-year period, from 1 July 1989 to 30 June 1993, and thereafter automatically
renewable for a further four-year period in the absence of explicit notice of
termination by either party. The agreement contained a clause granting the
harbour authority the right to “if necessary, and without interfering with Scandi
Line’s operations, use the berth for non-competing activities”.31 The agreement
also stipulated that the generally applicable harbour fees should apply.
37.
In 1990/91, prior to expiry of that agreement, Color Line sought to negotiate a
new agreement.32 Following negotiations, a harbour agreement
(“Arrendeavtal”) was concluded on 26 March 1991, valid for 15 years from 1
January 1991 to 30 December 2005.33 Thereafter, Color Line was entitled to
have the agreement extended for a further 10 years (clause 2).
38.
Pursuant to the harbour agreement, the Municipality of Strömstad leased a
designated area within the harbour – the area referred to as Torskholmen – to
Color Line, including the right to use the ramp and the lining-up area for cars
(clause 1). A map showing the designated area is annexed to the agreement.
Torskholmen is also indicated in the photograph at Section 5.4.5.2 below.
39.
It was agreed in the Arrendeavtal (clause 1) that a particular area at
Torskholmen should be leased to Color Line in the form of a ground rental
agreement (“Tomterättsavtal”). This area was designated for the erection of a
terminal building and a tube from the ferry to the terminal.
40.
A separate ground rental agreement (Tomterättsavtal) was therefore signed on
13 February 1992.34 The duration of that agreement was initially 20 years from
1 January 1991, with automatic renewal for a further 20 years unless terminated
29
Event # 408737, reply from the Municipality of Strömstad dated 22 January 2007. Exchange rate
2005, 1 Euro: SEK 9.2822; source ECB.
30
Event # 432050, reply from the Municipality of Strömstad dated 29 July 2007, p. 42.
31
Unofficial translation from Swedish by the Authority (“Hamnstyrelsen har vid behov utan att
inkräkta på Scandi Lines trafikk rätt att utnyttja färjeläget för icke konkurrerande verksamhet”).
32
Event # 408737, reply from the Municipality of Strömstad dated 22 January 2007.
33
Event 553056, Color Line’s Reply to the SO, attachment 12.
34
Event # 370985, p. 39 (PAB 38); see also event # 553056, Color Line’s Reply to the SO, paragraphs
224-227.
13
two years before expiry. The initial period expired on 1 January 2011, but was
renewed for a further 20-year period ending on 1 January 2031.35
41.
A supplementary agreement regarding the maintenance and other
responsibilities of the Municipality of Strömstad and Color Line respectively for
the installations in Strömstad harbour was entered into on 26 March 1991. A
further agreement was entered into on 19 January 1993, governing the division
of costs relating to additional works to be done in the harbour to meet Color
Line’s requirements following the introduction of a second vessel on the route.36
42.
Through the Arrendeavtal Color Line secured exclusive access to the area
designated for ferry activities in Torskholmen.
43.
Color Line’s right to exclusive use of the area in Torskholmen was provided for
in clause 7 of the Arrendeavtal, which provided that the Municipality was
entitled to grant third parties access to the ramp and lining-up area for cars,
except to competing ferry activities. It also provided that in the event that third
parties were granted access, such access should be coordinated with Color Line
in order to avoid disturbances to Color Line’s ferry operations as a result of the
use of the facilities by others. The relevant clause (clause 7) provided as
follows:
“During the contract period, the municipality may occasionally grant others
access to the car ramp and lining up area; however, this does not apply to
competing ferry activities. If this right is exercised, coordination with Color
Line shall take place, in order not to cause operational disturbances for the
ferry activities.”37
44.
According to the Municipality of Strömstad, such access has been granted to
Koster Marine, a company operating a cargo ferry for the Koster islands just off
the Swedish coast, on around 10 occasions.
45.
Pursuant to clause 3 of the Arrendeavtal, the harbour fees for Color Line were
fixed at a discount rate of SEK 1.5 million per year up to and including the year
2000. Thereafter, the standard harbour fees would apply. Pursuant to the further
agreement dated 19 January 1993, the Municipality of Strömstad undertook to
bear the costs of extending the quay to meet Color Line’s needs following the
introduction of a second vessel on the route, in return for an amount of SEK 1.4
million to be paid by Color Line to the Municipality during 1995, 1996 and
1997.38 The harbour fees were renegotiated in 2000, following which Color
35
See event # 553056, Color Line’s Reply to the SO, paragraph 227.
36
Event # 553056, Color Line’s Reply to the SO, paragraphs 222-224.
37
Unofficial translation from Swedish by the Authority (“Kommunen äger under avtalstiden tilfälligt
rätt att ge andra trafikanter rätt att använda ilandkörningsanlegg för bilar och uppställningsplats,
dock ej för konkurrerande färjeverksamhet. Om denna rätt skall utnyttjas, skall samordning mellan
bolaget och kommunen ske, så att upplåtelsen ej orsakar driftsstörningar för färjetrafiken”).
38
See event # 408737, reply of the Municipality of Strömstad dated 22 January 2007, question 6.
14
Line’s annual fees rose from SEK 1.5 million per year to between SEK 11.9 and
15.2 million from 2001 onwards.39
46.
Prior to the expiry of the Arrendeavtal in 2005, Color Line sought to invoke its
right to extend the duration of the agreement for 10 years as provided for
therein.40 However, since in the meantime the compatibility of the agreement
with competition law had been questioned, the Municipality refused to agree to
an extension unless Color Line’s exclusivity was revoked.41
47.
On 21 December 2005, just prior to the end of the initial 15-year period of the
Arrendeavtal, the Municipality decided to grant Kystlink access to the
harbour.42
48.
This Decision concerns the extent to which the Arrendeavtal, which in the
following is referred to as the harbour agreement or the 1991 harbour agreement
as the case may be, produced anti-competitive effects contrary to Articles 53
and 54 EEA. This Decision does not concern the ground rental agreement
(Tomterättsavtal) or the extent to which it may have produced anti-competitive
effects.
3.4
The Sandefjord – Strömstad route
49.
The Sandefjord – Strömstad route links the towns of Sandefjord, located in
Vestfold in Norway, approximately two hours by car to the south of Oslo on the
western side of the Oslofjord and Strömstad, located on the west coast of
Sweden, close to the Norwegian border. A map of the route is shown below.
39
Event # 401815, Color Line’s reply to question 10.
40
Event # 401818, p. 93, letter of 18 July 2005 from Color Line.
41
Event # 401818, p. 109-111.
42
Event # 401817, p. 31-36 (minutes from a meeting of Strömstad Municipal Assembly of 21
December 2005).
15
Map of Oslofjorden
Source: Google Maps
50.
3.4.1
51.
The ferry crossing between Sandefjord and Strömstad is 38 nautical miles long
and takes approximately 2.5 hours.
The passengers on the route
As explained below (paragraph 67), the number of passengers on the Sandefjord
– Strömstad route increased substantially during the period under examination.
Significantly more passengers travelled from Norway to Sweden than in the
opposite direction. Data for 2001, 2003 and 2005 show that between 748,000
and 823,000 passengers travelled from Sandefjord to Strömstad with Color Line
in each of those years. The number of passengers who bought a return ticket
16
with Sandefjord as the point of departure fell from around 141,000 in 2001 to
around 92,000 in 2005.43
52.
Far fewer passengers travelled in the opposite direction: according to Color
Line, between 391,000 and 419,000 passengers travelled from Strömstad to
Sandefjord between 2001 and 2005. The number of passengers who bought a
return ticket with Strömstad as the point of departure fell from around 28,000 to
just below 10,000 during the same period.44
53.
In the Reply to the SO, Color Line states that about two-thirds of passengers
travel from Norway to Sweden, while one-third travel in the opposite
direction.45 A significant share of passengers who travel from Sandefjord to
Strömstad drive back to Norway via the border crossing at Svinesund, north of
Strömstad.46
54.
According to Color Line, approximately 90% of passengers on the Sandefjord –
Strömstad route are Norwegian.47 In the summer of 2001, a survey carried out
by Color Line of the passengers travelling by car on Color Line routes from
South East Norway, found that almost two-thirds of passengers travelling from
Sandefjord to Strömstad came from the Norwegian counties of Telemark,
Buskerud and, in particular, Vestfold.48
3.4.2
55.
The importance of tax-free shopping
Many passengers on the Sandefjord – Strömstad route travel on short trips to
Sweden in order to take advantage of duty-free goods available on the ferry and
cheaper duty-paid goods available in Sweden. In a market study commissioned
by Color Line, the route between Sandefjord and Strömstad has been described
as a “pure border trade route; short travelling time, very low fares, many cars
and significant on-board sales (half alcohol/wine)”.49 The “very low fares”
seem to have been disproportionately low compared to other routes.50
43
Event # 401813, reply from Color Line dated 4 December 2006, annex 2.1.
44
Event # 401813, reply from Color Line dated 4 December 2006, annex 2.1.
45
Event # 553056, Color Line’s Reply to the SO, paragraph 148.
46
Event # 556768, p. 103, Annex 3 to Color Line’s Reply to the SO.
47
Event # 553056, Color Line’s Reply to the SO, paragraphs 136 and 158. See also event # 371361, p.
57 (TM7 19/22), report commissioned by Color Line, “Smoke over troubled water – Hvordan vil
Norges inntreden i EU påvirke Color Lines rammebetingelser, og hvordan bør Color Line tilpasse sin
strategi for å utnytte disse?”, p. 19.
48
Event # 371458, p. 69 (HZI 58 11/12, slide 22): Vestfold 33.4%, Telemark 19.0%, Buskerud 10.1%.
49
Event # 371361, p. 57 (TM7 19/22), (unofficial translation from Norwegian by the Authority: “SS er
en ren grensehandelslinje; kort reisetid, svært lave billettpriser, mange biler og betydelig ombord-salg
(halvparten sprit/vin)”). See also event # 371458, p. 61 (HZI 58 3/12, slide 6).
50
See, inter alia, event # 370702, p 167, (HZI 21, Budget for the routes of Vestfold County for 2006):
whereas the estimated average ticket price per passenger on the Sandefjord – Strömstad route in 2005
was only NOK 39.79, estimated spending per passenger in shops on-board averaged NOK 608.59 (p
180, HZI 21 14/23). By comparison, the estimated average ticket price per passenger on the Larvik –
17
56.
In its Reply to the SO, Color Line agrees that the share of on-board sales is high
and that the share of ticket revenue is low compared to longer ferry routes to,
for example, Denmark or Germany.51
57.
Color Line does not offer mini-cruises or cruises on the Sandefjord – Strömstad
route comparable to its offerings on other routes. There is, for example, no
possibility of overnight accommodation on its Sandefjord – Strömstad ferries.
58.
Color Line has submitted that cargo transport constitutes approximately [020%] of passengers and “cruise” passengers around [0-30%].52 Passengers
motivated by shopping opportunities are roughly estimated at between 65 and
75%.53
59.
In its Reply to the SO, Color Line confirms that a high share of passengers buy
alcohol and tobacco on-board its ferries on the Sandefjord – Strömstad route.54
The market study carried out by Color Line in May 2010 suggests that only
[less than 30%] of passengers do not make use of their tax-free quota at all.55
60.
In its Reply to the SO, Color Line states that in 1993 turnover from on-board
sales amounted to 75% of operating revenue and tickets sales only 20%. In
2000, on-board sales amounted to approximately 90% of operating revenue and
have […] to around [more than 75%] in recent years.56 Color Line links that
phenomenon to the availability of tax-free goods: “The high share of on-board
sales has to do with the sale of tax-free goods on board.”57
61.
The possibility for tax-free sales has thus been very important for Color Line as
it has created a distinct motive for consumers to travel on its Sandefjord –
Strömstad ferries.
62.
When setting the prices for its tax-free goods, the Authority understands that
Color Line adjusts its prices so that they are below the price of the goods in
question in the destination country (in casu, Sweden), in order to maximize its
Frederikshavn route was NOK 202.17 (albeit on a longer trip) and estimated average spending in onboard shops was NOK 341.03 (p 184, HZI 21 18/23).
51
Event # 553056, Color Line’s Reply to the SO, paragraph 159 (“Andelen ombordsalg er høy og
andelen billettinntekter er lav sammenliknet med lengre fergelinjer til f.eks. Danmark og Tyskland”).
52
Event # 553056, Color Line’s Reply to the SO, paragraphs 142-143. “Cruise” in this regard refers to
passengers who return on the same ferry (“Cruisepassasjerer er passasjerer som reiser tur-retur med
samme ferge”).
53
Event # 568548, e-mail from Color Line dated 6 September 2010 (“Basert på tallene over, kan det
meget omtrentlig anslås at transportkundene med handlemotiv utgjør mellom 60-75 % av totalt antall
reisende (begge veier)”).
54
Event # 553056, Color Line’s Reply to the SO, paragraph 161 (“En høy andel av de reisende kjøper
alkohol og tobakk om bord.”).
55
Event # 559854, question 17.
56
57
Event # 553056, Color Line’s Reply to the SO, paragraph 161 (“Den høye andelen ombordsalg har
sammenheng med salget av taxfreevarer om bord.”).
18
profits.58 Thus, in 2002, for example, prices in Color Line’s tax-free shops on
the Sandefjord – Strömstad route were reported to be 20-23% lower than prices
in Strömstad.59
3.4.3
Tonnage and number of sailings per day
63.
When the services on the route began in 1986, Color Line operated one ferry
and offered two daily sailings in each direction. In 1990/1991, the frequency of
sailings was increased to three per day in each direction in peak season (which
corresponds approximately to the school summer vacation in Norway).60
64.
In May 1992, Color Line acquired a second ferry, M/S Sandefjord, and
increased its activity to four daily sailings in each direction, five in peak
season.61
65.
In 1994, Color Line increased its activity to five daily sailings in each direction
and six in peak season (07:00, 10:00, 13:30, 17:00, 20:00 and 23:00). That
schedule was essentially maintained in subsequent years subject to minor
adjustments. In January and in parts of February there have only been two daily
departures using a single ferry, due to maintenance works. From 2009, Color
Line dropped its late night departure from Sandefjord (23:00) and now operates
with five daily departures in low and peak season.62
3.4.4
66.
Turnover, gross margins and increase in demand
In its Reply to the SO, Color Line points out that there has been a significant
increase in the number of passengers on the route over the period. It links this
increase in demand partly to its own investments in tonnage, harbour facilities
and marketing efforts.63 However, it also notes that there was a particularly
large increase in the number of passengers in the period from 1995 to 2000,
during which Color Line did not make any significant changes in the tonnage
used on the route. This surge in demand was essentially the result of exogenous
factors. According to the Menon Report (Annex I to the Reply to the SO), it
became increasingly advantageous for Norwegians to shop in Sweden during
the 1990s (due, inter alia, to exchange rate and price movements). The
advantage of shopping in Sweden for Norwegian citizens increased from 1994
to 2000 from 20% to 40%. Color Line claims that the increased advantage of
58
Event # 371361, p. 50 (TM 7 12/22), page 12 of the report entitled “Smoke over troubled water …”
(“Siden Color Line i dag har lagt sine priser rett i underkant av prisene i land på destinasjon”).
59
Event # 370865, p. 66 (BAL 30 15/30), presentation for Color Line Board meeting of 10 December
2002, “Budsjett 2003”.
60
61
62
63
19
shopping in Sweden corresponds almost perfectly to the increase in the number
of passengers on the Sandefjord – Strömstad route during the same period.64
67.
The increase in passengers on the Sandefjord – Strömstad route is illustrated by
a chart set out in Color Line’s Reply to the SO at paragraph 156:
Passenger numbers in thousands, Color Line’s Sandefjord–Strömstad route
68.
Color Line’s turnover on the route increased year-by-year from 1994, peaking at
NOK 899.7 million in 2005. Gross margins obtained on the route were in the
range of […], at least between 2001 and 2005.65
69.
Color Line confirmed at the oral hearing that its EBITDA margins (Earnings
Before Interest, Taxes, Depreciation and Amortization) as well as its EBIT
margins (Earnings Before Interest and Taxes) on the route have exceeded […].66
70.
As regards its profit margins on the route, Color Line argues that “gross profit
margins” are a very imprecise measure of how profitable the route has been,
64
65
Event # 401819, annex 2.2 to Color Line’s reply dated 4 December 2006. The turnover on the route
according to information provided by Color Line was NOK 274.6 million in 1995; NOK 331.6 million
in 1996; NOK 454.2 million in 1997; NOK 684.6 million in 1998; NOK 774.4 million in 1999; NOK
759.2 million in 2000; NOK 749.8 million in 2001; NOK 828 million in 2002; NOK 846.9 million in
2003; NOK 895.2 million in 2004; and NOK 899.7 million in 2005. Operating profit as a percentage of
turnover on the route (“bruttodriftsmargin”) was, according to Color Line’s internal accounts, […]% in
2001, […]% in 2002, […]% in 2003, […]% in 2004 and […]% in 2005. Prior to 2001 the financial
statements of the operating company on the route in question submitted by Color Line report
significant profits (event # 401819, annex 2.2). Turnover on the route in 1993 already amounted to
NOK 239.6 million, and net profits after tax to NOK 44.5 million.
66
“Det som kjennetegner marginbildet over alle disse årene er at frem til 1997, så var vi aldri over den
[…] marginen som nevnes her. … Resultatet før skatt har vel egentlig aldri vært over […] i margin.
Når det gjelder driftsresultatmarginen, altså etter avskrivninger men før finans, så har marginene i
noen år vært noe over […], men også i mange år vært under […]. EBITDA-marginen ligger naturlig
nok noe over driftresultatmarginen og har noen flere år som ligger over […], men også enkelte, eller
relative mange år, som ligger under […]. Så det er ikke noe entydig bilde”, recording from oral hearing
at 1h22m30sec.
20
since neither the costs of capital, such as interest payments, depreciation or
contributions to shared costs of the group, are included. It also emphasises that
ferry operations entail substantial fixed costs because of investments in
tonnage.67 Nevertheless, Color Line accepts that it enjoyed “good margins” on
the route.68
71.
While there is no need for the purposes of the present case to determine the
precise level of profits enjoyed by Color Line on the route, it follows from the
above that the route generated significant revenues and was a lucrative
operation for the company.69
3.5
Color Line’s investments in the Sandefjord – Strömstad route
3.5.1
Color Line’s investments in Strömstad
72.
Color Line has informed the Authority that it invested a total of NOK 31.5
million in Strömstad in the period from 1991 to 2006.70 Of that sum, NOK 12.8
million was invested in 1992 in erecting the terminal building and the passenger
tube; the rest was spread out over the entire period and included upgrading the
ramp (NOK 7.7 million in 1999), new customs facilities (NOK 4.1 million in
2000) and modification of the quay to the new vessel, Color Viking (NOK 0.7
million in 2000).71
73.
In addition, Color Line paid an extra yearly harbour fee of SEK 467 000 in the
period from 1995 to 1997 as compensation to the Municipality for lengthening
the quay at Color Line’s request.72 Color Line has stated that it made no
67
68
69
See also, for example, event # 371507, p. 38 (HZI 94 3/14) where […] in 1999 reports on the current
situation on the Sandefjord – Strömstad route: “It is well-known in the market that Color Line has large
revenues…” (unofficial translation from Norwegian by the Authority: “Det er velkjent i markedet at
Color Line har store inntekter…”); event # 371507, p. 83 (HZI 98 1/2), assessing the threat of new
entry on the Sandefjord – Strömstad route by, amongst others, Bastø-Fosen, and referring to the fact
that “Color Line…remains the strongest player in the market and continues to be a good source of
income in the long run” (unofficial translation from Norwegian by the Authority: “Color Line…forblir
den sterkeste aktøren i markedet og fortsetter å være en god inntektskilde over lang tid”). See also
event # 410203, p. 8, internal Bastø-Fosen presentation, December 1999, pointing out that the
Sandefjord – Strömstad route had been very profitable to Color Line over a long period of time and
characterising the route as a “milking cow within Color Line” (“Sandefjord – Strømstad har over en
lang periode gitt god lønnsomhet – er i dag en “melkeku”innen Color Line”).
70
Event # 553056, Color Line’s Reply to the SO, chapter 5.3.2. See also event # 401814, Color Line’s
reply to Question 10 (a), and event # 401815, which shows that investments in Torskholmen from 1991
to 2005 totalled NOK 29.981 million.
71
See event # 401814, Color Line’s reply of 4 December 2006, Question 10 (a) and event # 401813,
annex 10.2 to reply of 4 December 2006. See also event # 553056, Color Line’s Reply to the SO,
paragraphs 205-208.
72
See event # 401814, Color Line’s reply of 4 December 2006, Question 10 (b).
21
significant investments in the harbour before the agreements in Strömstad were
entered into.73
3.5.2
74.
Color Line’s investments in Sandefjord
In Sandefjord, Color Line has stated that it has invested a total of approximately
NOK 19 million since 1991. 40% of that investment was made in 1992 to
upgrade the existing terminal building and the tube (i.e. approximately NOK 7.6
million).74
3.5.3
75.
Color Line’s investments in tonnage
According to the Reply to the SO, Color Line has invested a total of NOK 464.2
million in tonnage on the route since 1988. Since 1991, when the agreement
with the Municipality of Strömstad was concluded, NOK 405 million has been
invested in purchasing and upgrading vessels. Those investments can be
summarised in the table below based on the information submitted by Color
Line in its Reply to the SO (paragraphs 244-248).
Color Line’s investments in tonnage on the Sandefjord – Strömstad route
between 1991 and April 2010 (million NOK):
Vessel
Capacity
(Passengers/
cars)
Acquisition
costs
Upgrades
Total
investment
M/S
Bohus 550 / 65
(1986-1988)
19.4
n.a.
19.4
M/S Bohus II 650 / 145
(1988-1992)
31.8
8
39.8
Total
investments
prior to 1991
51.2
8
59.2
M/S Sandefjord 1135 / 125
(1992-2000)
49
31
80
M/S
Bohus 1480 / 230
(Lion Princess)
(1994– present)
75
40
115
M/S
Color 1750 / 340
Viking (2000 –
to present)
148
62
210
73
Event # 430419, Color Line’s reply dated 19 July 2007, Question 7 (c).
74
22
Vessel
Acquisition
costs
Upgrades
Total
investment
Total
investments
since 1991
272
133
405
Total
investments
since 1986
323.2
141
464.2
3.5.4
76.
Capacity
(Passengers/
cars)
Other investments
Color Line also refers to marketing costs. It has provided data for the years from
1994 to 2009, during which it states that its total investment in marketing
amounted to NOK [300-400] million at current prices. Marketing costs from
1994 to 2005 amounted to NOK 275.7 million.75 Those costs were spread fairly
evenly over the whole period from 1994 to 2005, as shown in the table below.
Line specific marketing costs from 1994-2009 (million NOK):
3.6
3.6.1
1994
1995
1996
1997
1998
1999
2000
2001
13
13.3
16.8
20.6
33.9
37.8
37
20.2
2002
2003
2004
2005
2006
2007
2008
2009
20.4
21.8
22.7
23.1
22.7
[…]
[…]
[…]
The applicable tax-free regime
General framework
77.
VAT and excise duties are normally due in Norway on alcoholic beverages
when they are sold within Norwegian territory.
78.
The Norwegian VAT Act 196976 provides that the sale of goods and services
shall be subject to value added tax (Section 13). Goods for export are, however,
exempt from VAT (Section 16(1)(a)), as are “goods and services […] for use
75
76
Act No 66 of 19 June 1969. A new VAT Act was adopted in 2009 (Lov om merverdiavgift, Act No
58 of 19 June 2009, which entered into force on 1 January 2010). This Decision refers to the VAT Act
of 1969 since that was the applicable legislation throughout the entire period under examination.
23
aboard ships of at least 15 metres in length on international routes which
transport passengers or cargo upon consideration”.77
79.
The Norwegian Ministry of Finance is empowered to adopt regulations
“delimiting, adding detail to or implementing” these provisions.78
80.
Excise duties are fixed annually by the Norwegian Parliament79 on the basis of
the Excise Duty Act 1933.80 As a general rule, excise duties are due when
alcoholic beverages are produced or imported; goods for export are not subject
to excise duties and benefit from an excise duty refund in the event that such
duties have already been paid.
81.
Norwegian VAT and excise duties are normally charged on imports (Section 62
of the VAT Act). However, as a general rule, the import of small quantities of
alcoholic beverages by private persons is exempt from VAT and excise duties.81
Earlier versions of the relevant provisions have not always explicitly exempted
on-board sales, but only imports of goods into Norway by passengers. However,
in practice, on-board sales have also been exempt from VAT and excise duties.
82.
The right to import alcoholic beverages free of duty is also subject to the
condition that the traveller, if a Norwegian resident, remain outside the customs
area for at least 24 hours (the “24-hour rule”).82
3.6.2
Tax-free sales on ferry routes between the Nordic countries
3.6.2.1 Prior to 1 June 2002
83.
Tax-free sales on ferry routes between the Nordic countries have been and
continue to be subject to a specific set of rules.
84.
In 1968, Norway, Sweden, Finland and Denmark entered into the “Nordic
Agreement on the Provisioning for Passenger Vessels in Traffic between Ports
in Denmark, Finland, Norway and Sweden”.83 Pursuant to Article 3(a) of that
77
Section 16(2)(a). Unofficial translation from Norwegian by the Authority: “varer og tjenester … til
bruk for skip på minst 15 meter største lengde når det i utenriks fart frakter last eller mot vederlag
befordrer passasjerer ”.
78
Section 16, second paragraph. Unofficial translation from Norwegian by the Authority:
“Departementet kan gi forskrifter om avgrensning, utfylling og gjennomføring av bestemmelsene i
første ledd …”.
79
Vedtak om særavgifter til statskassen.
80
Lov om særavgifter av 19. mai 1933 nr 11.
81
Currently, the exemption is laid down in Section 5-2-1 of the Customs Regulation (Forskrift til lov
om toll og vareførsel, Regulation No 1502 of 17 December 2008, which entered into force on 1 January
2009); see also Section 7-2(1) of the new VAT Act and Section 2-6 of Regulation No 1451 of 11
December 2001 on Excise Duties.
82
That rule is currently found in Section 5-1-1-(1) of the Customs Regulation.
83
Event # 406232, reply from Norway dated 8 January 2007, annex 4, Overenskomst angående
proviantering av passasjerfartøyer i trafikk mellom havner i Danmark, Finland, Norge og Sverige,
referred to as “the Nordic Provisioning Agreement”.
24
Agreement, only tobacco, chocolate and other confectionery could be sold taxfree on board ferries on “routes which, according to the duty free regulations,
are to be considered as ‘short’”.84 Short routes were defined as all routes north
of the line from Risør in Norway to Lysekil in Sweden.85 Pursuant to Article
3(b), on “long” routes alcoholic beverages could also be sold tax-free on board
ferries.
85.
These rules were implemented into Norwegian law by way of the Travel Goods
Regulation.86 Sections 2 and 3 set out the conditions under which private
persons were entitled to bring small quantities of alcoholic beverages into
Norway without being subject to VAT, excise and customs duties. Section 6
provided that “goods bought aboard vessels operating on short routes between
Norway and other countries cannot be imported free of customs duties and
other taxes as provided for in Section 2 and 3 of this regulation”.87 Sections 2
and 3 laid down a number of other conditions for the import of duty-free goods,
inter alia requirements relating to the value, quantity and strength (of alcoholic
beverages) of goods, as well as the “24-hour rule” (Section 2(6)).
86.
In Swedish law, the provisions of the Nordic Provisioning Agreement were
incorporated into Section 8 of Regulation (1987:1072) on the right of travellers
and others to import customs and duty-free goods.88 When Color Line applied
for a licence to sell a full range of tax-free goods on board its ferries on the
Sandefjord – Strömstad route, there was no legal basis for allowing such sales
because that route was a “short” route. On 15 December 1987, the Norwegian
Ministry of Finance nevertheless granted Color Line an exemption from the
general rules, to the effect that its route from Sandefjord to Strömstad was
84
Unofficial translation from Norwegian by the Authority (“på ruter som i henhold til
tollfrihetsreglene for reisende anses som korte”).
85
According to the Norwegian Travel Goods Regulation (Forskrifter om tollfrihet for reiseutstyr og
reisegods No. 12 of 26.5.1978).
86
Regulation No 12 of 26 May 1978.
87
Unofficial translation from Norwegian by the Authority (“Varer kjøpt ombord i fartøyer som
trafikkerer korte ruter mellom Norge og utlandet, tillates ikke medbragt toll- og avgiftsfritt etter
bestemmelsene i §§ 2 og 3 foran”).
88
Förordning (1987:1072) om rätt för resande m.fl. att införa varor tull- och skattefritt. The provision
read: “On those maritime and air transport routes between Sweden and Denmark, Finland and Norway
specified in the second paragraph of this provision, the right to duty-free import of goods purchased
aboard shall not apply to liquor, wine or strong beer and not to more than 40 cigarettes or 20 cigars or
cigarillos or 100 grammes of other tobacco goods. The right to duty free imports pursuant to
paragraph 1 applies to travellers who arrive by vessel in traffic on routes between […] a Norwegian
harbour from Risör in the west to the Swedish border in the east and a Swedish harbour from the
Norwegian border in the north to Lysekil in the south.” (Unofficial translation from Swedish by the
Authority: “På sådana fartygs- och flyglinjer mellan Sverige och Danmark, Finland eller Norge som
anges i andra stycket omfattar rätten till tullfri införsel av varor som anskaffats ombord inte
spritdrycker, vin eller starköl och inte mer än 40 cigaretter eller 20 cigarrer eller cigariller eller 100
gram andra tobaksvaror. Rätt till tullfri införsel enligt första stycket gäller i fråga om resande som
kommer med fartyg i trafikmellan […] norsk hamn från och med Risör i väster till svenska gränsen i
öster och svensk hamn från norska gränsen i norr till och med Lysekil i söder […].”). This Regulation
was later replaced by Regulation (1994:1694) on Certain provisioning, etc. (Förordning om viss
proviantering m.m.).
25
treated as a “long” route. As a result, Color Line was able to sell tax-free
alcoholic beverages on board its ferries on the route. This was made possible by
inserting a legal basis for granting exemptions into Section 6 of the Travel
Goods Regulation, which empowered the Ministry of Finance to “grant
exemptions for certain ferry routes by deciding that they are to be considered as
‘long routes’”.89 This regulatory change was agreed between Norwegian and
Swedish customs authorities.90
87.
A corresponding amendment was inserted into the applicable Swedish
Regulation.91 As from 1 July 1999, the Regulation was revoked and the rules
were taken into Section 6 of a new Act (1999:446) relating to the Provisioning
of Vessels and Aircrafts.92 While the original version the Act contained no legal
basis for derogating from the prohibition on tax-free sales on short routes, an
amendment inserting a provision replicating the former derogation provision
was adopted in December 1999.93 Derogations under the provision would be
retroactively applicable back to 1 July 1999. Thus, in substance, the rules
remained identical as concerns the route in question.94
88.
Color Line has been permitted to offer tax-free sales on the Sandefjord –
Strömstad route since 1 January 1988.95 However, from 1992 until 1998 Color
Line had to apply each year for a prolongation of its tax-free licence.96
89.
While Color Line was granted an exemption, the Norwegian authorities
declined applications from other operators wishing to start ferry services with
tax-free sales on “short” routes.
90.
In 2001, Bastø-Fosen AS challenged in court a refusal by the Norwegian
authorities to grant it a tax-free licence, alleging that the Norwegian authorities
had infringed the non-discrimination principle in Norwegian administrative law.
Bastø-Fosen had applied for a licence to sell tax-free goods on a proposed route
89
Unofficial translation from Norwegian by the Authority (“Finans- og tolldepartementet kan gjøre
unntak for særskilte fartøysruter slik at rutene blir å anse som ‘lange’”).
90
Event # 556768, p. 241, letter from the Swedish Ministry of Finance to the Norwegian Ministry of
Finance, annex 26 to Color Line’s Reply to the SO.
91
A new provision was inserted as paragraph 3 of Section 8 of Regulation (1987:1072): “The
Government may decide that the provisions of paragraphs 1 and 2 shall not apply in respect of certain
maritime routes.” (Unofficial translation from Swedish by the Authority: “Regeringen kan medge att
bestämmelserna i första och andra styckena inte skall gälla i fråga om viss fartygslinje.”). The same
provision was later found in Section 6, 5th paragraph, Regulation (1994:1694).
92
Lag (1999:446) om proviantering av fartyg och luftfartyg.
93
Act (1999:1332) amending Act (1999:446) relating to the Provisioning of Vessels and Aircrafts.
Unofficial translation from Swedish by the Authority (Lag (1999:1332) om ändring i lagen (1999:446)
om proviantering av fartyg och luftfarty), entry into force on 1 January 2000.
94
Event # 406232, reply from Norway dated 8 January 2007; event # 553056, Color Line’s Reply to
the SO, paragraph 266; and event # 556768, annex 26 to Color Line’s Reply to the SO.
95
Event # 406232, reply from Norway dated 8 January 2007, enclosure 1; event # 553056, Color
Line’s Reply to the SO, paragraphs 284-291.
96
26
from Sandefjord to Strömstad in June 1998.97 The national court took the view
that the difference in treatment between Bastø-Fosen AS and Color Line, was
discriminatory and in breach of general principles of Norwegian administrative
law.98 The court emphasised in particular that Color Line had been allowed to
increase its capacity on the route both prior to Bastø-Fosen’s application and
again when Color Line replaced its vessel M/S Sandefjord with M/S Color
Viking, shortly after the final rejection of Bastø-Fosen’s application (in
November 1999).
3.6.2.2 Post-1 June 2002
91.
Following the judgment in the Bastø-Fosen case, the tax-free rules were
amended, in 2002. Norway and Sweden concluded the “Short Routes
Agreement”.99 Article 3 of that Agreement provided that the prohibition on taxfree sales on “short routes” would continue to apply; however, the competent
authorities of Norway and Sweden were empowered to make derogations in
favour of routes as far north as the Sandefjord – Strömstad line which met the
criteria laid down in Article 4. Pursuant to Article 4, derogations could only be
made for routes operated on a year-round basis according to a fixed schedule,
which had the capacity to transport cargo and vehicles to a significant extent,
and provided that satisfactory customs arrangements were in place.
92.
In Norway, these rules were subsequently incorporated into Section 6 of the
Travel Goods Regulation. From 1 June 2002, Section 6(3) provided that the
customs authorities could allow tax-free sales to passengers on board vessels on
routes from a Norwegian harbour located between Sandefjord and Risør to a
Swedish harbour located between the Norwegian border and Lysekil, provided
that the route operated on a year-round basis according to a regular schedule,
that it had the capacity to transport cargo and vehicles to a significant extent,
and that satisfactory customs arrangements were in place. It was also made clear
in the preparatory works to the amended rules that a tax-free licence must be
granted where those conditions are met.100 Thus, under the new provision, the
granting of a licence is no longer subject to the authorities’ discretion where the
conditions are met. Finally, it was clear from the provision that, “[w]hen such
permission has been granted, the passengers may import goods purchased on
board in accordance with Sections 2 and 3 above”,101 which entailed, inter alia,
that the “24-hour rule” applied.
97
See event # 413602, p. 20, reply from Norway dated 8 January 2007, annex 11; event # 409259,
judgment by Oslo City Court of 5.10.2001, p. 2.
98
Event # 409259, judgment by Oslo City Court of 5.10.2001. The refusals by the Norwegian
authorities of applications for tax-free licences on “short” routes from operators other than Color Line
is described in some detail in the judgment at p. 27-28.
99
Event # 406232, reply from Norway dated 8 January 2007, annex 3.
100
Event # 406232, consultation paper issued by the Norwegian Ministry of Finance on 6 September
2001 (annex 6 to reply from Norway dated 8 January 2007).
101
Event # 406232, reply from Norway dated 8 January 2007, annex 7. (Unofficial translation from
Norwegian by the Authority: “Når slik tillatelse er gitt, kan den reisende innføre varer kjøpt om bord
etter bestemmelsene i §2 og §3 foran”).
27
93.
In Sweden, the exemption provision in Section 6 of the Act relating to the
Provisioning of Vessels and Aircrafts was also amended.102 As from 1 June
2002, it read: “The Customs Authority shall, upon application, decide that the
provisions of paragraphs 1 and 2 [of Section 6] shall not apply to a maritime
route between a Swedish harbour from Strömstad in the north to Lysekil in the
south and a Norwegian harbour from Risør in the west to Sandefjord in the east,
which operates on a year-round basis according to a regular schedule and
which has the capacity to transport vehicles and cargo to a significant
extent.”103
94.
A number of technical changes have subsequently been made to the tax-free
rules, both in Norway and Sweden, but in substance the rules concerning short
routes and tax-free sales have remained the same.
4
THE RELEVANT MARKET
4.1
Introduction
95.
According to the Authority’s Notice on the definition of the relevant market, the
main purpose of market definition is to identify in a systematic way the
competitive constraints that the undertakings concerned face. The objective of
defining a market is to identify the competitors of the undertakings concerned
that are capable of constraining those undertakings’ conduct and of preventing
them from behaving independently of effective competitive pressure.104
96.
A relevant product market comprises all those products and/or services which
the consumer, by reason of the products’/services’ characteristics, their prices
and their intended use, regards as interchangeable or substitutable.105
97.
The relevant geographic market comprises the area in which the undertakings
concerned are involved in the supply and demand of products or services in
which the conditions of competition are sufficiently homogeneous and which
can be distinguished from neighbouring areas because the conditions of
competition are appreciably different in those areas.106 In transport markets, the
definition of the relevant market usually includes a geographic element in its
own right, since the place where the service is provided needs to be taken into
account in determining whether the service is substitutable for other services.
102
Amendment (2002:264) of the Act relating to Provisioning of Vessels and Aircrafts (Lag om
ändring (2002:264) i lagen (1999:446) om proviantering av fartyg och luftfartyg).
103
Unofficial translation from Swedish by the Authority: “Tullverket skall på ansökan besluta att
bestämmelserna i första och andra styckena inte skall tillämpas om det är fråga om en fartygslinje
mellan svensk hamn från och med Strömstad i norr till och med Lysekil i söder och norsk hamn från
och med Risör i väster till och med Sandefjord i öster med åretrunttrafik enligt regelbunden tidtabell
och
kapacitet
att
transportera
gods
och
fordon
i
betydande
omfattning.”
(http://www.riksdagen.se/webbnav/?nid=3911&bet=1999%3A446).
104
The Authority’s Notice on the definition of the relevant market for the purposes of EEA competition
law, OJ L 200/48 of 16 July 1998 and EEA Supplement No 28, 16.7.1998, p. 3, paragraph 2.
105
Notice on the definition of the relevant market, paragraph 7.
106
28
98.
When defining a relevant market, regard may be had both to demand
substitution and supply substitution. However, from an economic point of view,
demand substitution generally constitutes the most immediate and effective
disciplinary force on the suppliers of a given product, in particular in relation to
their pricing decisions. Basically, the exercise of market definition consists of
identifying the effective alternative sources of supply for the customers of the
undertakings concerned, both in terms of products/services and geographic
location of suppliers.107
99.
Supply-side substitutability may also be taken into account when defining
markets in those situations in which its effects are equivalent to those of demand
substitution in terms of effectiveness and immediacy. This means that suppliers
are able to switch production to the relevant products/services and market them
in the short term without incurring significant additional costs or risks in
response to small and permanent changes in relative prices. When supply-side
substitutability entails the need to make significant adjustments to existing
tangible and intangible assets, additional investments, strategic decisions or time
delays, it will generally not be considered at the stage of market definition.108
4.2
The relevant market for passenger services
100. The present case concerns the provision of passenger ferry services by Color
Line between the Norwegian port of Sandefjord and the port of Torskholmen in
Strömstad harbour in Sweden. That is the starting point for the definition of the
relevant market.109
101. As described above, the crossing from Sandefjord to Strömstad is a passenger
ferry service of short duration (approximately 2.5 hours). There is no possibility
of overnight accommodation on the ferry. In that regard, the route is different
from most of Color Line’s other routes, which also offer mini-cruises or
roundtrips with overnight lodging on the ferry. The Sandefjord – Strömstad
route is a short-haul point-to-point passenger transport service.
102. The European Court of Justice (ECJ) and the General Court have confirmed that
markets for passenger transport services can be defined on the basis of
individual routes or a bundle of routes, to the extent that there is substitutability
between them according to the specific features of the case.110 The test to be
107
Notice on the definition of the relevant market, paragraph 13. See also, Case T-177/04 EasyJet v
Commission [2006] ECR II-1931, paragraph 99.
108
Notice on the definition of the relevant market, paragraphs 20 and 23.
109
Those services must be distinguished from the port facilities and services provided by Sandefjord
and Torskholmen harbours to ship operators calling at those ports, which is to be seen as an upstream
market to the provision of passenger ferry services. See event # 451831, Opinion of the European
Commission in application of Article 15(1) of Council Regulation (EC) 1/2003 of 16 December 2002
on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty –
Swedish Supreme Court (Högsta Domstolen) case T-2808-05, Danska Staten genom Bomholmstrafiken
v Ystad Hamn Logistik Aktiebolag, paragraphs 23-24.
110
Case 66/86 Ahmed Saeed Flugreisen [1989] ECR 803, paragraphs 39-41; Case T-2/93 Air France v
Commission [1994] ECR 320, paragraphs 84 and 85; Case T-177/04 EasyJet v Commission [2006]
ECR II-1913, paragraphs 55-57, 61.
29
applied in determining whether a particular route can be distinguished from
possible alternatives is therefore whether there are specific characteristics as a
result of which that route is not interchangeable with those alternatives and is
affected only to an insignificant degree by competition from them.111 Elements
to be taken into account in that exercise include the place of origin and
destination of the ferry customers, existing traffic flows and customer sensitivity
to changes in total travel time, crossing time, price and service (which includes
the frequency of services and the existence of road and rail connections from the
port).112
103. An important feature of the Sandefjord – Strömstad route is the availability of
duty-free products aboard the ferries. As described above, the possibility to
provide duty-free sales on short routes between Norway and Sweden has been
limited to a specific geographic area along the Norwegian and Swedish coasts.
104. It is recalled that Color Line itself has described the route as a “pure border
trade route; short travelling time, very low fares, many cars and significant onboard sales (half alcohol/wine)”. It is also recalled that the route is characterised
by a high share of passengers who buy tax-free products aboard the ferries, that
a very high share of Color Line’s operating revenue comes from on-board sales,
and that the share of ticket revenue is low (paragraphs 55-61 above).
105. During the period under examination, the only other direct ferry service
between Norway and Sweden was between Gothenburg and Kristiansand. That
service ceased operating in 2006. That route was a long-haul route which
benefitted from tax-free sales, but it only operated three sailings per week. The
frequency of that route was therefore much more limited than the Sandefjord –
Strömstad route, which had several sailings per day. The route was also of
considerably longer duration – 6½ to 7 hours, depending on the sailing – than
the route between Sandefjord and Strömstad.113
106. In addition, most passengers travelling from Sandefjord to Strömstad come from
Telemark, Buskerud and, in particular, Vestfold (see paragraph 54 above) and a
large part of the passengers on the Sandefjord – Strömstad route are motivated
by shopping possibilities. Many drive home by car.114 The distance between
Kristiansand and Sandefjord is 207 km, approximately a 2 hour and 40 minute
drive; the distance from Skien in Telemark to Kristiansand is 181 km,
approximately a 2 hour and 20 minute drive; while the distance from Skien to
Sandefjord is around 52 km, approximately a 50 minute drive.115 In that light, it
111
Case 66/86 Ahmed Saeed Flugreisen [1989] ECR 803, paragraph 40.
112
Event # 451831, Opinion of the European Commission to the Swedish Supreme Court in case T2808-05, paragraphs 23-24.
113
Event # 372556, DFDS’ schedules for 2006, which was the last year of operation of the route
(electronic document from the inspection carried out at Color Line’s premises).
114
See also event # 371458, HZI 58 10/12 (slide 20), which indicates alternative routes back home for
passengers who buy one-way tickets on Color Line’s ferry routes. It is notable that very few passengers
travelling on the Sandefjord – Strømstad route indicated that other international ferry routes were
considered as alternatives.
115
Source: Google Maps.
30
is very unlikely that the route between Gothenburg and Kristiansand represented
a relevant competitive constraint on Color Line’s route between Sandefjord and
Strömstad.
107. The Authority is not aware of any information that indicates that Color Line’s
pricing on the route between Sandefjord and Strömstad was influenced by the
pricing of the ferry operator DFDS on the route between Kristiansand and
Gothenburg. No such information has been submitted by Color Line, who
would be the first to feel such constraints. There is no evidence, therefore, that
the route between Gothenburg and Kristiansand placed any competitive
constraints on Color Line’s Sandefjord – Strömstad route, such that it should be
included in the relevant market.
108. There were several ferry routes from South East Norway to destinations in
Germany and Denmark, but those routes were generally of considerably longer
duration than the Sandefjord – Strömstad route, more expensive in terms of
ticket prices, and most offered only one or two departures per day.116 For the
vast majority of passengers travelling between Norway and Sweden on the
Sandefjord – Strömstad route travelling via Denmark or Germany was not an
alternative to which they would likely have switched in the case of small,
permanent changes in relative prices.117
109. There is a car ferry between the Norwegian ports of Horten and Moss in the
Oslo Fjord, operated by Bastø-Fosen AS. For passengers travelling by car with
Color Line from Norway to Sweden, driving to Horten and then taking the ferry
to Moss and driving from Moss to Sweden would have been the most obvious
alternative.118 The distance by road between Sandefjord and Horten is around 40
km, which takes around 40 minutes to drive. The ferry crossing between Horten
and Moss takes approximately 30 minutes (there are very frequent crossings –
in rush hour, departures are every 30 minutes). The distance by road between
Moss and Strömstad is around 80 km, which took more than more than one hour
to drive at the relevant time.119 In addition to the fares on the Horten – Moss
ferry, passengers would have had to pay fuel costs and, since July 2005, the
road-toll between Moss and Strömstad. However, as that route is between two
Norwegian ports, tax-free sales are (and were) not available.
116
Oslo – Kiel: approximately 19.5 hours; Oslo – Fredrikshavn: approximately 12 hours; Oslo –
Copenhagen: approximately 16.5 hours; Larvik – Hirtshals: approximately 5 hours and 45 minutes (3
hours and 45 minutes after the introduction of SuperSpeed in 2008); Kristiansand – Hirtshals:
approximately 2.5 to 4.5 hours (depending on the vessel used) (3 hours and 15 minutes after the
introduction of SuperSpeed in 2008).
117
118
Driving the whole way via the Oslo Fjord Tunnel between Hurum and Drøbak or via Oslo could
also be alternatives but would be more time consuming for people living close to Sandefjord/Horten.
The distance by road between Sandefjord and Strömstad (via the subsea tunnel at Drøbak) is 231 km
and takes around three hours to drive. A person driving the whole way would have to pay toll and fuel
costs. However, tax-free sales would not be available on such a route.
119
Due to significant road improvements, the travel time from Moss to Strömstad today is around one
hour (source: Google Maps).
31
110. Although passengers taking such a route could have bought (duty-paid)
products in Sweden more cheaply than in Norway, depending on prevailing
taxes and exchange rates, Color Line’s prices aboard its ferries, which are (and
were) free of taxes, would normally be lower (but still provide Color Line with
a good margin on each sale – see Section 3.4.2 above). As already indicated in
that Section, on-board sales are and have been a very important source of
revenue for Color Line.
111. Given the importance of on-board shopping and the price differences between
duty-free products on-board and duty-paid products in Sweden, driving via the
Horten – Moss ferry (or driving the whole way) was not a substitute for the vast
majority of passengers, with or without a car, who valued access to low prices
and tax-free products on the Sandefjord – Strömstad route.
112. For passengers travelling without a car, driving via the Horten-Moss connection
(or driving all the way) was not an alternative to taking the ferry between
Sandefjord and Strömstad; such passengers would have had to arrange transport
from Sandefjord to Horten and from Moss to Strömstad (or all the way to
Strömstad).
113. Finally, the significant earnings that Color Line has enjoyed on the Sandefjord –
Strömstad route (see Section 3.4.4 above) indicate that driving via the Horten –
Moss ferry (or driving the whole way) combined with shopping in Sweden did
not exert significant competitive constraints on Color Line. As a result, those
alternatives were not sufficiently close substitutes to the ferry service from
Sandefjord to Strömstad such as to be included in the relevant market.
114. In the light of the above, the Authority takes the view that, during the period
under examination, there were no alternative routes which were sufficiently
close substitutes to Color Line’s Sandefjord – Strömstad route so as to be
included in the same relevant market for the provision of short-haul passenger
ferry services with tax-free sales.
115. As regards the geographical dimension of the relevant market, Color Line’s
route between Sandefjord and Strömstad concerns short-haul passenger ferry
services with tax-free sales between specific ports on the coast of Norway and
Sweden. Therefore, there is an inherent geographical dimension in the definition
of the relevant product market, firstly, by reference to the Norwegian and
Swedish ports in question and, secondly, by the exclusion of long-haul routes
from the market definition which excludes routes operated from ports too far
away from the ports used by Color Line to be regarded as short-haul routes.
116. In November 2006, Kystlink began the operation of a short-haul passenger ferry
service with tax-free sales between Langesund, in Norway, and Strömstad in
Sweden in competition with Color Line, which might indicate that routes from
ports between Langesund and Sandefjord could have formed part of the relevant
market. However, for the purposes of the present case the exact definition of the
geographical scope of the relevant market can be left open since Color Line
was, in any event, the only provider of short-haul passenger ferry services with
tax-free sales between Norway and Sweden during the period under
examination in this Decision.
32
4.3
Color Line’s submissions on market definition
117. Color Line has argued that the Authority has put too much emphasis on
travelling time, and that the relevant market should include harbours south of
Strömstad on the Swedish side, and possibly also harbours south of Langesund
on the Norwegian side. Color Line also claims that prior to their amendment in
June 2002, the tax-free regulations did not prevent ferry lines from ports north
of Sandefjord from obtaining a tax-free licence. Thus, harbours north of
Sandefjord should also have been included in the relevant market until June
2002.120
118. Color Line also maintains that the Authority wrongly assumes, when defining
the relevant market, that most passengers infringe the 24-hour prohibition on
bringing tax-free goods into Norway, since the Authority believes, Color Line
alleges, that it is important to passengers to be able to return to Norway shortly
after they have finished shopping in Sweden.121
119. Color Line further argues that the Authority should have distinguished between
different passenger segments, since cruise, cargo and purely transport-motivated
customers have other alternatives when compared to customers motivated by
shopping. Also, harbours south of Strömstad, for instance Lysekil, are an
alternative for the mainly transport-orientated customers going to Gothenburg or
other southern destinations.122
120. Finally, Color Line maintains that the ferry route between Horten and Moss is a
significant competitive factor for Color Line’s Sandefjord – Strömstad route.123
121. None of those arguments calls into question the Authority’s definition of the
relevant market for the purposes of this case.
122. With regard to harbours south of Strömstad and Sandefjord and harbours north
of Sandefjord the Authority notes, in response to Color Line’s arguments, that
there were no competing ferry lines from such harbours during the period under
examination. Therefore, Color Line’s customers did not have the possibility of
switching to alternative ferry services in response to a hypothetical small but
significant increase in Color Line’s prices. Further, the available facts do not in
any way suggest that supply-side substitution could have had a disciplinary
effect on the competitive behaviour of Color Line (see paragraph 99 above). In
line with its Notice on market definition, the Authority will not consider
potential competitive constraints posed by the possibility of operating short-haul
routes with tax-free sales from alternative harbours at the market definition
120
Event # 553056, Color Line’s Reply to the SO, section 9.3.
121
122
Event # 553056, Color Line’s Reply to the SO, section 9.3.
123
33
stage. The Authority will revert to that issue when assessing in its competition
analysis factors and circumstances relating to the conditions of market entry.124
123. As regards Color Line’s submission as to the 24-hour rule, the Authority refers
to a report submitted by Color Line which indicates that only [less than 25]% of
passengers do not take advantage of the tax-free quota on-board. That report
also indicates that in 2010 [60-90]% of passengers were day travellers, that is,
travellers who leave and return on the same day.125 In its Reply to the SO, Color
Line states that in 1993 turnover from on-board sales amounted to 75% of
operating revenue; by 2000 that had risen to approximately 90% (see paragraph
60 above).126 The Authority also notes that the Norwegian Ministry of Finance
has, on a number of occasions, referred to the difficulties in ensuring that the
24-hour rule is complied with.127 In any event, Color Line’s arguments have no
impact on the definition of the relevant market. As discussed above, during the
period under examination, there were no competing ferry lines operating shorthaul passenger ferry services with tax-free sales between Norway and Sweden.
124. Finally, as regards Color Line’s argument to the effect that the relevant market
should be split along the lines of the different customer segments, the Authority
notes that the vast majority of customers have always been motivated by
shopping and that cargo, cruise and purely transport-motivated customers
represent a minority.128 Moreover, the overwhelming majority of the profits
derived from the route have come from tax-free sales on-board, while income
from transport fares has been disproportionately low.129 Thus, the importance to
a ferry operator of customers other than shopping-motivated customers was
marginal throughout the relevant period. Therefore, a new ferry operator in the
market would have had to rely mainly on income from shopping-motivated
passengers, and not from cargo passengers or purely transport-orientated
passengers, a small and unprofitable segment compared to shopping-motivated
passengers. The loss of some of the former passengers in response to a price
124
Notice on the definition of the relevant market, paragraphs 14 and 24. Paragraph 24 provides that:
“… potential competition, is not taken into account when defining markets since the conditions under
which potential competition will actually represent an effective competitive constraint depend on the
analysis of specific factors and circumstances related to the conditions of entry. If required, this
analysis is only carried out at a subsequent stage, in general once the position of the companies
involved in the relevant market has already been ascertained, and when such position is indicative of
concerns from a competition point of view”. See Section 5.4.5 below.
125
Event # 566191, “Analyse av hvilke steder i Sverige som utgjør reisemotiv for reisende med Color
Lines linje Sandefjord‐Strømstad”, 19 May 2010, p. 6-7.
126
127
Event # 406232, attachment 11.
128
Event # 553056, Color Line’s Reply to the SO, section 5.1.2.1 and paragraph 467. Color Line
argues that transport customers with shopping motives constitute a distinct product market which must
be limited to the routes whose location at any given time provide the possibility of being granted an
exception to sell tax-free goods.
129
See paragraph 60 above. See also event # 371361, TM7, report entitled “Smoke over troubled
water”, p. 19, where it is stated that “the main source of income today is on-board sales with high
margins” (unofficial translation from Norwegian by the Authority: “hovedinntektskilden i dag er salg
om bord, med høye marginer”).
34
increase by Color Line would not be sufficient to have any disciplinary effects
on Color Line’s behaviour, such as to make it necessary to expand the relevant
market in this case.
125. Even if a separate relevant market were to be found for those customers whose
motivation for travelling is only related to their transport needs and, further, that
such a market would include both the Sandefjord – Strömstad route and the
alternative of driving via the ferry connection Horten – Moss, such a finding
would neither negate nor contradict the finding of another, separate relevant
market for the provision of short-haul passenger ferry services with tax-free
sales between Sandefjord and Strömstad. Customers belonging to the first
market would not represent a competitive constraint on Color Line’s pricing of
tax-free goods, the main source of its turnover and its profits on the route in
question.130
4.4
Conclusion on the relevant market
126. In the light of the above considerations, the Authority takes the view that during
the period from 1 January 1994 to 20 December 2005, which was characterised
by the fact that Color Line was the sole operator with its route between
Sandefjord, Norway, and Strömstad, Sweden, the relevant market was likely
limited to the provision of short-haul passenger ferry services with tax-free sales
between ports in these two municipalities (see paragraph 122).
127. However, for the purposes of this Decision, the question can remain open as to
whether the geographical scope of that relevant market, as regards the
Norwegian coast, also extended to a stretch between Sandefjord and Langesund
(the port from which Kystlink operated its route to Strömstad between
November 2006 and November 2008),131 or even to a stretch north of
Sandefjord, since Color Line was, in any event, the sole supplier of short-haul
passenger ferry services with tax-free sales between Norway and Sweden during
the period from 1 January 1994 to 20 December 2005.
128. For the same reason, the question as to whether the relevant market could be
defined more broadly to include routes operated from ports on the Swedish
coastline south of the Municipality of Strömstad can remain open for the
purposes of this Decision.
130
Thus, Color Line’s argument that “it remains important to us that prices on Sandefjord – Strömstad
should be competitive in relation to Bastø-Fosen” does not say anything about the strength of BastøFosen’s ticket prices as a competitive constraint on Color Line’s pricing on the Sandefjord – Strömstad
route for the purposes of market definition in this case, and has no impact on the market definition
analysis set out above, event # 553056, Color Line’s Reply to the SO, paragraphs 166 and 167,
unofficial translation from Norwegian by the Authority (“Det er fortsatt viktig for oss at prisene på
Sandefjord-Strömstad er konkurransedyktige i forhold til Bastø-Fosen”).
131
See paragraph 11 above.
35
5
ARTICLE 53(1) EEA
5.1
Introduction
129. Article 53(1) of the EEA Agreement prohibits as incompatible with the
functioning of the EEA Agreement all agreements between undertakings and
concerted practices which may affect trade between Contracting Parties and
which have as their object or effect the prevention, restriction or distortion of
competition within the territory covered by the EEA Agreement.
130. Article 53(1) EEA is identical in substance to Article 101(1) of the Treaty on
the Functioning of the European Union (TFEU). According to Article 6 EEA
and Article 3(2) of the Surveillance and Court Agreement the case law of the
ECJ and the General Court is therefore relevant for the interpretation of Article
53 EEA.132
131. It is a fundamental objective of the EEA Agreement to achieve and maintain
uniform interpretation and application of those provisions of the EEA
Agreement that correspond to provisions of the TFEU, and to arrive at equal
treatment of individuals and economic operators as regards conditions of
competition in the whole of the EEA.133
5.2
Jurisdiction
132. The division of competences between the Authority and the European
Commission as regards the application of Article 53 EEA is laid down in Article
56(1) EEA, which provides that:
“1. (a) individual cases where only trade between EFTA States is affected shall
be decided upon by the EFTA Surveillance Authority;
(b) without prejudice to subparagraph (c), the EFTA Surveillance Authority
decides, as provided for in the provisions set out in Article 58, Protocol 21 and
the rules adopted for its implementation, Protocol 23 and Annex XIV, on cases
where the turnover of the undertakings concerned in the territory of the EFTA
States equals 33 per cent or more of their turnover in the territory covered by
this Agreement;
(c) the [European] Commission decides on the other cases as well as on cases
under (b) where trade between [EU] Member States is affected, taking into
account the provisions set out in Article 58, Protocol 21, Protocol 23 and Annex
XIV …”
133. It follows from the provisions of Article 56(1) EEA read in conjunction with
Article 56(3) EEA that, without prejudice to cases whose effects on trade
between EU Member States and on competition within the EU are appreciable,
132
See Case E-3/97 Jan and Kristian Jæger AS [1998] EFTA Ct. Rep. 1, paragraph 19; and Case E8/00 Landsorganisasjonen i Norge [2002] EFTA Ct. Rep. 114, paragraph 39.
133
Case E-8/00 Landsorganisasjonen i Norge [2002] EFTA Ct. Rep. 114, paragraph 39.
36
the Authority is the competent authority under Article 56(1)(b) EEA in cases
where the turnover of the undertakings concerned in the territory of the EFTA
States amounts to 33% or more of their turnover in the EEA as a whole.
134. According to Article 2 of Protocol 22 to the EEA Agreement:
“Turnover within the meaning of Article 56 of the Agreement shall comprise the
amounts derived by the undertakings concerned, in the territory covered by the
Agreement, in the preceding financial year from the sale of products and the
provision of services falling within the undertaking’s ordinary scope of
activities after deduction of sales rebates and of value-added tax and other
taxes directly related to turnover.”
135. As regards the agreement in Strömstad, the undertakings concerned are Color
Line AS and the Municipality of Strömstad. The parties have provided the
following turnover figures for 2005, the year preceding the start of the
Authority’s investigation.
Color Line AS134
Municipality of Strömstad135
(million Euro)
(million Euro)
EFTA-wide
489.69
0
EU-wide
80.28
2.3
Turnover
136. On the basis of the above figures, the combined EEA turnover of the parties
amounted to EUR 572.27 million in 2005, of which EUR 489.69 million, or
85.6%, was in the territory of the EFTA States. In that light, the EFTA turnover
of the parties was significantly greater than 33% of their combined EEA
turnover.
137. In conclusion, therefore, as regards the application of Article 53 EEA, the
Authority is the competent authority pursuant to Article 56 EEA.
5.3
Agreement between undertakings
138. Article 53(1) of the EEA Agreement applies to agreements between
undertakings. The definition of an “undertaking” covers any entity engaged in
an economic activity, regardless of the legal status of that entity and the way in
which it is financed. It is the activity consisting of offering goods and services
134
Event # 401815, reply from Color Line dated 4 December 2006, annex 4. Exchange rate 2005, 1
Euro: NOK 8.0092, source ECB.
135
Event # 408737, reply from the Municipality of Strömstad dated 22 January 2007. Exchange rate
2005, 1 Euro: SEK 9.2822, source ECB.
37
on a given market that is the characteristic feature of an economic activity.136
The operation of a port constitutes a commercial activity.137
139. The fact that a public entity (a municipality) owns and operates the port does
not in itself alter that conclusion.138 However, Article 53 EEA does not apply to
an entity that acts in the exercise of official authority. That is the case where the
activity in question is a task in the public interest which forms part of the
essential function of the State and where that activity is connected by its nature,
its aim and the rules to which it is subject with the exercise of powers which are
typically those of a public authority.139
140. Color Line is an undertaking within the meaning of the EEA competition rules.
141. The Municipality of Strömstad, when entering into the harbour agreement in
1991, also acted in its capacity as an undertaking and not in its capacity as a
public authority.140
142. The act at issue in the present case is termed an “agreement” and is, in its form
and contents, similar to any other private law contract governing the offer of
services in return for remuneration. The Municipality of Strömstad has
confirmed to the Authority that Swedish municipalities are separate legal
entities and may enter into private law agreements within their areas of
competence. They may also operate commercial activities with a view to
providing services of general utility or services to the inhabitants of the
municipality, and charge fees for them. The Municipality has further explained
that the agreement with Color Line at issue “produces legal effects under civil
law and may be tried before the courts for example on pleas concerning breach
of contract. The municipality is, in entering into the agreement, also subject to
Swedish law such as the Act relating to the conclusion of agreements, the act
relating to real estate in so far as the disposal of real estate is concerned,
etc”.141
143. Thus, under Swedish law, the harbour agreement concluded in 1991 with Color
Line was governed by private law and its conclusion did not depend on the
exercise of public powers by the Municipality of Strömstad; nor was its
objective to regulate harbour access in Strömstad.
144. The Authority also notes that the agreement is not in the form of a concession or
licence: Color Line has not been granted an exclusive concession or licence
136
Case C-205/03 P FENIN v Commission [2006] ECR I-6295, paragraph 25.
137
See, for example, European Commission Decision 94/19/EC, OJ L 15, 18/01/1994, p. 8, concerning
the port of Holyhead, and IP/95/492 / XXV Report on competition policy, paragraph 43, concerning
the port of Roscoff in France, and European Commission Decision 94/119/EC, Port of Rødby, OJ L 55,
26/02/1994, p. 52.
138
Case C-393/92 Gemeente Almelo and others v Energiebedrijf IJsselmij [1994] ECR I-1477.
139
Case C-343/95 Calì e Figli [1997] ECR I-1547, paragraphs 22-23.
140
Case 30/87 Corinne Bodson [1988] ECR 2479.
141
Event # 408737, reply from the Municipality of Strömstad dated 22 January 2007, p. 2-3.
38
under Swedish public law.142 The content of the agreement is essentially
confined to regulating the rights and obligations of the parties with regard to the
subject-matter of the agreement, that is, the provision of harbour access by the
Municipality of Strömstad for Color Line’s exclusive use against remuneration,
which was negotiated between the parties. The evidence suggests that it was
Color Line that took the initiative to negotiate and conclude the long-term
agreement and was eager to obtain exclusive access to Torskholmen while the
Municipality simply regarded it as an advantage to have a long-term user in the
harbour.143 Consequently, the exclusivity clause was neither imposed by the
Municipality in its capacity as a public authority nor inspired by general interest
objectives.
145. In that light, there is no indication that the objective of the Municipality of
Strömstad in this case was to regulate the market on the basis of provisions
pertaining to public law; rather, the provision by the Municipality of harbour
access and related services to Color Line was commercial in nature.144 The
harbour agreement therefore constitutes an agreement between undertakings for
the purposes of Article 53(1) EEA.
5.4
5.4.1
Restriction of competition
Introduction
146. An agreement infringes Article 53(1) of the EEA Agreement if it has as its
object or effect the prevention, restriction or distortion of competition within the
territory covered by the EEA Agreement.
147. In order for an agreement to be restrictive by effect it must affect actual or
potential competition to such an extent that on the relevant market negative
effects on prices, output, innovation or the variety or quality of goods or
services can be expected with a reasonable degree of probability.145 According
to settled case law, anti-competitive effects may be both actual and potential.146
148. Negative effects on competition within the relevant market are likely to occur
when the parties individually or jointly have or obtain some degree of market
142
Case C-393/92 Gemeente Almelo and others v Energiebedrijf IJsselmij [1994] ECR I-1477.
143
Event # 408737, reply from the Municipality of Strömstad to question 7a (“Rederiet tog initiativ till
förhandling om upprättande av ett arrandeavtal. [...] Rederiet var angeläget att ha en exklusiv tillgång
til ramp och uppställningsplats. Från kommunens sida ansågs det fördelaktigt med en långsiktig
brukare av hamnen […]”).
144
The fact that the Municipality of Strömstad was active commercially is illustrated by its turnover
from commercial activities, which, in 2005, was EUR 8.7 million, of which EUR 2.3 million was
income from its harbour activities (see paragraph 35 above).
145
The Authority’s Guidelines on the application of Article 53(3) of the EEA Agreement, OJ C 208,
06.09.2007, p. 1 and EEA Supplement to the OJ No 42, 06.09.2007, p. 1, paragraph 24. Guidelines on
Vertical Restraints, adopted on 15 December 2010, not yet published in the Official Journal of the EU
or the EEA Supplement thereto, paragraph 97.
146
Case C-7/95 P John Deere v Commission [1998] ECR I-3111, paragraph 77, and the case law cited
therein.
39
power and the agreement contributes to the creation, maintenance or
strengthening of that market power or allows the parties to exploit such market
power.147 The creation, maintenance or strengthening of market power can
result from a restriction of competition between the parties to the agreement and
between any of the parties and third parties, for example because the agreement
leads to foreclosure of competitors or because it raises competitors’ costs,
limiting their capacity to compete effectively with the contracting parties.148
149. For the purposes of analysing the restrictive effects of an agreement a number of
factors may be taken into account, including the nature of the products, the
market position of the parties, the market position of competitors, the market
position of buyers, the existence of potential competitors and the level of entry
barriers.149
150. The negative effects that may result from long-term exclusive agreements and
which EEA competition law aims at preventing essentially concern anticompetitive foreclosure of other suppliers through the raising of barriers to entry
or expansion. Foreclosure may harm consumers, in particular by increasing
prices, limiting the choice of products/services, lowering their availability and
quality, or reducing the level of innovation.
151. In its recent judgment in Visa v Commission, the General Court restated the
legal test that must be met in order to find that an agreement restricts
competition by effect within the meaning of Article 101(1) TFEU, and thus
under Article 53(1) EEA:
“It is evident from settled case-law that in assessing an agreement, a decision of
an association of undertakings or a concerted practice under Article [101] (1)
EC, account should be taken of the actual conditions in which they produce
their effects, in particular the economic and legal context in which the
undertakings concerned operate, the nature of the products or services
concerned, as well as the real operating conditions and the structure of the
market concerned, unless the matter at issue is an agreement containing
obvious restrictions of competition such as price-fixing, market-sharing or the
control of outlets ...
The examination of conditions of competition on a given market must be based
not only on existing competition between undertakings already present on the
relevant market but also on potential competition, in order to ascertain whether,
in the light of the structure of the market and the economic and legal context
within which it functions, there are real concrete possibilities for the
undertakings concerned to compete among themselves or for a new competitor
to enter the relevant market and compete with established undertakings …
147
Guidelines on the application of Article 53(3) EEA, paragraph 25. See also Guidelines on Vertical
Restraints, paragraph 97.
148
Guidelines on the application of Article 53(3) EEA, paragraph 26.
149
40
Further, if an agreement, a decision of an association of undertakings or a
concerted practice is to be considered to be prohibited by reason of the
distortion of competition which is its effect, the competition in question should
be assessed within the actual context in which it would occur in the absence of
the agreement, decision of an association of undertakings or concerted practice
in dispute …”150
152. The Authority’s Guidelines on Vertical Restraints are consistent with the test set
out in Visa v Commission.151
153. In the present case, it is relevant, inter alia, to carry out an analysis of barriers to
entry faced by undertakings which were not already competing on the relevant
market. Barriers to entry are factors that make entry impossible or unprofitable
while permitting established undertakings to charge prices above the
competitive level. Whether entry is profitable depends in particular on the cost
of (efficient) entry and the likely prices post-entry. The higher the cost of entry
and the lower the likely post-entry prices, the greater the risk that entry will be
unprofitable and therefore not attempted. Entry barriers may result from a wide
variety of factors, such as economies of scale and scope, government
regulations, especially where they establish exclusive rights, state aid, import
tariffs, intellectual property rights, ownership of resources where the supply is
limited due to for instance natural limitations, essential facilities, a first mover
advantage and brand loyalty of consumers created by strong advertising over a
period of time. Vertical restraints and vertical integration may also work as an
entry barrier by making access more difficult and foreclosing (potential)
competitors.152
154. Persistently high market shares may be indicative of the existence of barriers to
entry.153
5.4.2
The restrictions resulting from the harbour agreement in Strömstad
155. The harbour agreement in Strömstad granted access to the Torskholmen area
within Strömstad harbour exclusively to Color Line for a significant period. It
prevented the Municipality of Strömstad from granting access to the facilities in
Torskholmen to anyone other than Color Line for an initial period of 15 years,
with an entitlement granted to Color Line to extend that period for an additional
10 years.
150
Case T-461/07 Visa Europe Ltd and Visa International Service v Commission, judgment of 14 April
2011, not yet published, paragraphs 67-69 and 166-167, and the case law cited therein. See also Case
E-7/01 Hegelstad Eiendomsselskap Arvid B. Hegelstad and Others v Hydro Texaco AS, EFTA Court
Report 2002, p. 310, paragraph 33.
151
See Guidelines on Vertical Restraints, paragraph 194-197.
152
Guidelines on Vertical Restraints, paragraph 117.
153
Communication from the Commission — Guidance on the Commission’s enforcement priorities in
applying Article 102 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, OJ
C 45, 24.2.2009, p. 7, paragraph 16.
41
156. Through that agreement, Color Line effectively obtained a right to exclusive use
of all available capacity in that strategically located harbour for a period of 25
years (15 plus 10 years), irrespective of whether it would actually use or even
need that capacity. Color Line operated the route between Sandefjord and
Strömstad from 1986 to 2006 – that is, over 20 years – without any competition:
during that period, Color Line was the only company offering passenger ferry
services on the relevant market.
157. In the following Sections, the Authority will show that, in a market already
characterised by high barriers to entry, the harbour agreement excluded the
possibility for other companies to operate ferry services from the port of
Torskholmen in Strömstad, made access to the market considerably more
difficult and thereby foreclosed the relevant market for a substantial period of
time, thus allowing Color Line to maintain a monopoly position on that market.
158. In the Authority’s view, in the light of the characteristics of the market in
question, the entry of a new player would have created scope for further
competition in a market distinguished by an extremely high degree of
concentration.
5.4.3
Color Line’s market position and barriers to entry
159. The possible restrictive effects of an agreement within the meaning of Article
53(1) EEA must be assessed (inter alia) in the light of the position of the parties
on the market and the level of entry barriers (see paragraph 149 above).154
160. Color Line was the only operator on the relevant market for passenger ferry
services throughout the period under examination. It enjoyed a first-mover
advantage, and had the time to acquire experience, and build up and optimise its
service in the absence of competition. The absence of competition also enabled
Color Line to build its brand name and become well-known to consumers. Color
Line has also become well-known in the market generally, due to the scope of
its operations. It has grown to become by far the biggest ferry operator on routes
between Norway and neighbouring countries. Thus, its operations on other
routes, as well as marketing for such routes and general branding activities, are
also likely to have contributed to brand loyalty on the Sandefjord – Strömstad
route during the relevant period.155
161. An example of a measure promoting brand loyalty is Color Club: membership
(currently NOK 160 per annum) allows passengers to collect bonus points
which can later be exchanged for free trips with Color Line. Membership also
gives other advantages, such as discounts in on-board shops.156 Color Club was
introduced in 2001; prior to that, Color Line had different loyalty schemes on
154
155
In Case T-342/07 Ryanair v Commission, judgment of 6 July 2010 (not yet published), the General
Court upheld the Commission’s finding that entry costs and risks were significant “in a market already
served by two strong airlines with well-established brands”, paragraphs 276-281.
156
Event # 582507, extract from Color Line’s Internet homepage.
42
different routes.157 Due to the time Color Line has operated on the Sandefjord –
Strömstad route and other routes, and the number of routes on which it operates,
such programmes are likely to have had strong loyalty-enhancing effects on
regular passengers.158 Indeed, in its Reply to the SO, Color Line states that the
Sandefjord – Strömstad route has many regular customers, many of whom are
members of Color Club.159
162. Given the size of Color Line’s operations, it is also likely to have benefited from
a degree of bargaining power vis-à-vis the suppliers of goods that are sold
aboard its ferries, which smaller players would be unable to match.
163. Color Line has grown to become a large and profitable company, whose
financial standing is significantly superior to that of its competitors. Color
Line’s long-term sole presence in the relevant market has allowed it to enjoy
significant earnings on the route, thereby adding to its financial strength.160
164. In that light, it is clear that Color Line had market power during the period
under examination and that it strengthened its market position significantly
during that period.
165. Color Line’s conduct also shows the lengths to which it has been prepared to go
in order to protect its long-term exclusivity on the Sandefjord – Strømstad route
and to prevent potential competitors from gaining access to the market. Color
Line has established itself as an aggressive competitor, willing and able to
defend its position and exercise its market power in order to do so.
166. Thus, a strategy paper for a Color Line board meeting in December 1999 stated
that:
“… Neutralize threats
With neutralizing threats we mean that when competitors try to work their way
into our domains, we have to try to protect our position in these areas in a
rational, sensible and strategically correct way …
The threat from competitors which want to enter the Sandefjord – Strömstad
route in addition to capacity problems, led to our decision to introduce a new
ship [i.e. MS Color Viking] on this route (even if this is a great effort), and in
that way try to neutralize threats.”161
157
Event # 370865, p. 109 (BAL 32, p. 12: “Fra tre klubber til Color Club fra 1. januar 2001”).
158
See, for example, event # 371391, p. 43 (HSO 2 39/48: “Ingen reiselivsaktører i Norge kan tilby et
lojalitetsprogram av samme omfang som CL”).
159
160
See Section 3.4.4 above.
161
Event # 371458, p. 151-152 (HZI 66 1/5 – 2/5, unofficial translation from Norwegian by the
Authority: “Nøytralisere trusler. Med å nøytralisere trusler mener vi at når konkurrenter forsøker å
arbeide seg innpå våre enemerker må, vi på en rasjonell, fornuftig og strategisk riktig måte prøve å
beskytte vår posisjon på de områdene…Trusselen fra konkurrenter som vil innpå Sandefjord-
43
167. In an internal memorandum dated 29 February 2000, Color Line describes how
it is in a position of dominance on the Sandefjord – Strømstad line, and how the
solution to dealing with potential newcomers is to use its dominance, and
through its control of terminals close to the centre of “both cities”.162 Examples
of Color Line’s actual response to attempted new entry are described below in
Section 5.4.4.
168. Color Line’s reputation, in combination with its strong market position and
financial strength, has sent a clear signal to potential new entrants of limited
prospects, if any at all, for survival in the market. That has been capable,
therefore, of discouraging and deterring potential new entry. The European
Courts have held that building up a reputation for deterring the entry of
competitors can create a barrier to entry for new competitors.163
169. In addition, Color Line has pointed out in its Reply to the SO that ferry
operations are in general characterised by substantial sunk costs. Fixed costs
include, in particular:

Operations-independent fixed costs, which are incurred independently of the
volume of the operation of the route, and include investments in tonnage and
onshore facilities. Such costs may in part be irrecoverable as investments may
have little or no re-sale value (e.g. investments in harbour installations,
adaptations of tonnage to ports and routes and route-specific marketing).

Operations-dependent fixed costs, which are incurred during operations but
depend on passenger numbers only to a limited degree; they include expenses
relating to technical operations, maintenance, port fees, fuel and
administration.164
170. In this regard, the Authority notes that sunk costs are costs that have to be
incurred in order to enter or be active on a market but that are lost when the
market is exited. The more costs that are sunk, the more potential entrants have
to weigh up the risks of entering the market, and the more credibly incumbents
can threaten that they will match new competition, as sunk costs make it costly
for incumbents to leave the market. Thus, sunk costs which have been incurred
by Color Line as the incumbent operator and which would be required for new
entry are a factor that raise barriers to entry in the relevant market.165
Strømstsad samt kapasitetsproblemer gjorde at vi besluttet å sette inn et nytt skip på ruten (selv om det
er et stort løft), og på den måten forsøke å nøytralisere trusler”).
162
Event # 371507, p. 83 (HZI 98 1/2), strategy document of February 2000 (“Color Line kan
konkurrere med potensielle inntrengere gjennom markedsdominans og ved i kontrollere sentrumsnære
terminaler i begge byer”); see also the lobbying strategy outlined in a discussion paper of 3 April 2000,
event # 371507, p. 50 (HZI 95).
163
In Case T-342/07 Ryanair v Commission, judgment of 6 July 2010, paragraphs 284-288 (not yet
published), the General Court upheld the Commission’s finding that in building up a reputation for
deterring the entry of competitors, Ryanair had created a de facto barrier to entry for new competitors.
164
165
44
171. Finally, the restrictions in the harbour agreement must be seen in the context of
the special regime, described above in section 3.6, for tax-free sales on shorthaul routes between Norway and Sweden. In order to compete with Color Line,
a new entrant had to apply for and obtain an exemption from the tax-free rules
by way of a tax-free licence for a competing route. That added an additional
burden for potential new entrants and represented a legal barrier to entry.
5.4.4
Attempts at new entry and Color Line’s response thereto
172. At least three significant attempts have been made by potential competitors to
enter the relevant market for passenger ferry services and compete with Color
Line on the Sandefjord to Strömstad route. Two of those attempts were
unsuccessful; the third – by Kystlink – succeeded only after the initial period of
exclusivity granted to Color Line under its agreement with the Municipality of
Strömstad came to an end.166
Bastø-Fosen
173. Bastø-Fosen, the operator of the Horten – Moss line, first considered the
possibility of establishing a competing route in 1997. In its view, Color Line’s
ferries on the route at the time were of poor quality; ticket prices, especially in
summer, were excessive; and tax-free prices were among the highest in Europe.
As a result, Bastø-Fosen considered that it would be possible to enter the market
profitably.167
174. Bastø-Fosen applied for access to Strömstad harbour and Sandefjord harbour on
4 June 1998.168 It appears that the harbour administration in Strömstad initially
gave positive signals to Bastø-Fosen, but stated that it would be necessary to
expand the infrastructure in Strömstad harbour and that that possibility was
being assessed.169 However, in response to a question from the Authority,
Bastø-Fosen has explained that neither the Municipality of Strömstad nor the
harbour authorities gave any indications that they would endeavour to let BastøFosen have access to Torskholmen.170
166
In correspondence with the Authority, the Municipality of Strömstad has referred to some other
companies that have tried to establish ferry lines since 1994. However, none of those companies
succeeded in establishing a route that was able to compete successfully with Color Line: event #
408737, reply from the Municipality of Strömstad of 22 January 2007 (p. 4-5, reply to question 10);
event # 371458, p. 166 (HZI 71 3/5).
167
Event # 410202, reply of Bastø-Fosen dated 15 February 2007, p. 1-2. See also event # 410203, p. 8,
internal Bastø-Fosen presentation, December 1999, pointing out that the Sandefjord – Strömstad route
had been very profitable to Color Line over a long period of time and characterising the route as a
“milking cow within Color Line” (“Sandefjord – Strømstad har over en lang periode gitt god
lønnsomhet – er i dag en “melkeku”innen Color Line”).
168
Event # 410204, annex 2 to Bastø-Fosen’s reply of 15 February 2007, p. 4; event # 413828, annex
38 to the reply by the Municipality of Sandefjord dated 14 March 2007.
169
Event # 410204, annex 2 to Bastø-Fosen’s reply of 15 February 2007, p. 38 (letter from the
Municipality of Strömstad to Bastø-Fosen dated 8 June 2001).
170
Event # 410202, reply of Bastø-Fosen dated 15 February 2007, p. 3.
45
175. At that time, during peak season, Color Line operated six arrivals and
departures from Strömstad per day.171 The ships used were MS Bohus, with a
capacity of 240 cars, and MS Sandefjord, with a capacity of 134 cars. In January
2000, Color Line applied to exchange MS Sandefjord with Color Viking, which
had capacity for 370 cars. The application was granted by the Norwegian
authorities on 23 February 2000.172 After that, Color Line occupied even more
of the available capacity at Torskholmen, and the Municipality of Strömstad
decided (on 28 March 2000) that no permits for additional development in the
harbour would be granted as there were no possibilities for additional
establishments without large incursions into the surrounding area.173 Color
Viking was operational from 14 June 2000.
176. Bastø-Fosen has explained that, as a consequence of the Municipality of
Strömstad’s negative decision, and the refusal of its application for a tax-free
licence by the Norwegian Ministry of Finance, it gave up its plans to enter the
relevant market.174
Larvik-Strømstadlinjen AS
177. A second attempt to establish a competing route was made in 1999/2001 by
Larvik-Strømstadlinjen AS. Larvik-Strømstadlinjen AS announced its plans to
establish a route between Larvik and Strömstad on 19 September 2000.175 It
appears that the company had been promised access to the harbour in Larvik.176
By 6 September 2001, a proposal to amend the tax-free rules had been made
public.177 The Municipality of Strömstad investigated the possibilities for colocalisation at Torskholmen and consulted both Larvik-Strømstadlinjen AS178
and Color Line179 concerning the frequency of trips, type of boats, number of
171
Event # 401813, annex 14.1 to Color Line’s reply dated 4 December 2006; event # 553056,
paragraphs 249-254.
172
See reference in event # 406232, annex 1, letter dated 2 March 2000 from the Ministry of Finance to
Color Line granting it a tax-free licence.
173
Event # 410205, judgment by Oslo City Court of 5 October 2001 p. 40 (annex 3 to Bastø-Fosen’s
reply dated 15 February 2007).
174
Event # 410202, reply of Bastø-Fosen dated 15 February 2007, p. 3.
175
Event # 440704, p. 4 article in the local newspaper Østlandsposten dated 19 September 2000 (“Ny
ferge mellom Norge og Sverige”, http://www.op.no/Innenriks/article84472.ece).
176
Obtaining that promise was however a time-consuming process. According to Color Line, LarvikStrømstadlinjen’s application for harbour access was made on 3 December 1999, while a draft harbour
agreement was not presented to Larvik-Strømstadlinjen until 13 August 2001. The draft agreement was
only temporary and required significant investments on the part of Larvik-Strømstadlinjen (see event
553056, Color Line’s Reply to the SO, paragraphs 340-341 and annexes 39-41).
177
See event # 406232, p. 19, annex 6 to Norway’s reply of 8 January 2007.
178
Event # 407261, p. 161, reply from the Municipality of Strömstad dated 22 January 2007, annex 3,
letter from Larvik-Strømstadlinjen AS dated 12 March 2001. This document shows that LarvikStrømstadlinjen wished to co-locate with Color Line at Torskholmen and gives several examples of colocation at other harbours. Larvik-Strømstadlinjen was of the opinion that co-location with Color Line
at Torskholmen would not be a practical problem.
179
Event # 407261, reply from the Municipality of Strömstad dated 22 January 2007, annex 3, letter
from Color Line AS dated 24 April 2001.
46
boats, possibility of co-localisation in the terminal, customs facilities, and load
times (see also below, Section 5.4.5.2.2).
178. Color Line claimed that the frequency of its sailings would probably increase,
and that the harbour already at that time had too little space. It also pointed to
potential problems concerning the use of the berth and the lining-up area if
another operator were allowed to call at Torskholmen.180
179. Only shortly after Larvik-Strømstadlinjen’s announcement of its planned new
route, in spring 2001 Color Line announced plans to establish a route between
Larvik and Strömstad as of spring 2002,181 which would increase its daily
sailings from Strömstad from six to seven in peak season.182 Minutes from a
Color Line board meeting on 29 May 2001 reported that:
“… Larvik - Strømstadlinjen AS appears as a concrete attack against the
Sandefjord – Strömstad route. The company will get access to quay spaces in
Larvik harbour, but has problems in Strømstad. The company does not have a
licence for tax-free sales on short routes. It is presumed that the availability of
tonnage is good. As a response to the threat it has been announced that MS
Skagen is to be put on the Larvik – Strømstad route. The only thing which is
missing is the licence for tax-free sales. It is expected that the authorities will
come out with a report concerning the licensing rules in spring 2002. MS
Skagen will during the peak season 2001 be used in RO/RO traffic between KRS
and Hirtshals with one weekly trip to Larvik. MS Skagen will be manned to
transport 50 passengers. The Board of Directors took note of the report.”183
180. A Color Line working group estimated that the cost of the new route between
Larvik and Strömstad would be in the region of NOK 49 million, whereas the
estimated turnover was only NOK 40 million.184 Instead of introducing the new
route, the working group recommended a reduction in tax-free prices on the
Sandefjord – Strömstad route in order to keep customers.185 However, Color
Line’s […] disagreed:
180
Event # 407261, p. 163-168, reply from the Municipality of Strömstad dated 22 January 2007,
annex 3, letter from Color Line AS dated 24 April 2001.
181
Event # 408737, p. 162, annex to reply from the Municipality of Strömstad dated 22 January 2007
(letter from the Municipality of Strömstad to Color Line dated 1 April 2001).
182
Event # 408737, p. 48, annex to reply from the Municipality of Strömstad dated 22 January 2007 .
183
Event #371458, p. 162 (HZI 70 1/2: unofficial translation from Norwegian by the Authority:
“Larvik - Strømstadlinjen fremstår som et konkret angrep mot Sandefiord - Strømstadlinjen. Selskapet
vil få tilgang på kaiplass i Larvik havn, men har problemer i Strømstad. Selskapet står uten konsesjon
for tax free salg på kort rute. Det antas at tilgjengelighe på tonnasje er god. Som motsvar på trussel er
det annonsert at MS Skagen settes inn på ruten Larvik-Strømstad. Det eneste som mangler er konsesjon
for tax free salg. Det er ventet at myndigheten vil komme med en utredning vedr.
konsesjonsbestemmelsene våren 2002. MS Skagen vil i høysesongen 2001 benyttes i RO/RO trafikk
mellom KRS og Hirtshals med en tur ukentlig til Larvik. MS Skagen blir bemannet for å frakte 50
passasjerer. Styret tok rede-gjørelsen til etterretning.”).
184
Event # 370702, p. 222-225 (HZI 26 and 27: the cost would be NOK 81.2 million including lost
revenue on the Sandefjord – Strømstad route due to cannibalisation).
185
Event # 370702, p. 224-225 (HZI 27).
47
“My recommendation is that we should have 5 departures here from Sandefjord
as we have today (with some changes in the schedule). In addition I think that
we should take out M/S Skagen from Larvik 1 trip in low season and possibly 2
in peak season. (This is in harmony with the working group’s suggestion in the
enclosed documents). I think that we in this way more rapidly will manage to
get rid of a competitor than if we only continue to use our two boats here from
Sandefjord. If we continue with departures only from Sandefjord, I am afraid
that it might take a long time before the competitor “goes under”. I am aware
that a new player will hit the price in tax-free first. There is possibly nothing
else to do here than to answer – but this we will have to decide on later. The
difference between me and the group is that I want to spend more resources in
order to, as quickly as possibly, get rid of the competitor. I know that this can be
quite costly to begin with, but what I fear most is a prolonged war.”186
181. However, in March 2002, it became clear that Larvik-Strømstadlinjen would not
be able to commence its route during summer 2002: it appears that the company
struggled to obtain sufficient financing187 as well as harbour access in Sweden
(see also below, Sections 5.4.5.2.2 and 5.4.5.4.1). That same month, March
2002, on […] recommendation, Color Line decided to postpone its proposed
service from Larvik to Strömstad:
“… - do not believe in any establishment in Strömstad or Lysekil during
summer. The earliest start-up is during autumn in Lysekil or during 2003 in
Strömstad. Start-up in Kålviken is possible at the earliest in the last half of
2003, but will be very resource-demanding financially.
- Our recommendation is, therefore, that we withdraw the start-up of M/S
Skagen on Larvik – Strømstad on 1 June 2002 and announce that we will
perhaps wait for a later start-up…”.188
186
Event # 370702, p. 224 (HZI 27 1/2: unofficial translation from Norwegian by the Authority: “Min
instilling er at bør ta 5 avganger her fra Sandefjord slik vi har I dag (med noen rutetidendringer). I
tillegg mener jeg at vi bør ta M/S Skagen ut fra Larvik 1 tur i lavsesong og eventuelt 2 i høysesong.
(Dette samstemmer med gruppens opplegg i vedlagte dokumenter). Jeg mener at vi på denne måten
hurtigere vil klare å ”feie” en konkurrent av banen enn at vi bare skal fortsette å gå med våre to skip
her fra Sandefjord. Jeg er klar over at en ny aktør vi[l] gå på pris i taxfree først. Her har vi muligens
ikke noe annet å gjøre enn å svare, men det får vi ta stilling til senere. – Forskjellen på meg og
gruppen er at jeg vil sette inn mer ressurser for hurtigst mulig å bli kvitt konkurrenten. Jeg vet det kan
koste hardt med det samme, men jeg er mest redd for en “langvarig krig”.”).
187
Event # 371458, p. 189 (HZI 76 1/2), internal Color Line memorandum stating that it had been
ascertained that Larvik-Strømstadlinjen (which in the meantime had changed its name to LarvikLysekillinjen) had not established the necessary financial platform to commence a route beween Larvik
and Lysekil (“Det er konstatert (fra presse og havnemyndigheter etc) at Larvik-Lysekillinjen AS ikke
har etablert nødvendig finasielt ståsted til å starte opp ruten mellom Larvik og Lysekil til sesongen
2002”).
188
Event # 371458, p. 181 (HZI 74 3/7: unofficial translation from Norwegian by the Authority: “Tror
ikke på noen etablering verken i Strømstad eller Lysekil i sommer. Tidligste oppstart er til høsten i
Lysekil eller i år 2003 i Strømstad. Oppstart i Kålviken er tidligst mulig siste halvdel år 2003, men er
sterkt ressurskrevende finansielt. – Vår anbefaling er derfor at vi trekker tilbake oppstarten av M/S
Skagen på Larvik - Strømstad den 1.6.2002 og meddeler at vi eventuelt avventer en senere oppstart.”).
See also event # 371458, p.189 (HZI 76), annex to result/estimate regarding decision to postpone start
up of the Larvik – Strömstad route, with attached press release.
48
182. Larvik-Strømstadlinjen never succeeded in establishing the route and the
company has since been dissolved. Color Line never established a service
between Larvik and Strömstad.
Kystlink
183. The third serious attempt – and the only successful attempt – at establishing a
competing route was launched on 4 November 2003, at a time when the tax-free
rules had been amended, when RAUL (Kystlink) applied to the Municipality of
Strömstad for harbour access at Torskholmen.189
184. When Color Line found out that Kystlink was looking for new tonnage and was
attempting to establish a route to Strömstad, it immediately started looking for
“corresponding tonnage”.190 It decided to charter the vessel MS Thjelvar on
very short notice.191 The decision to do so was explained to the Board of Color
Line as follows:
“To the board of Color Line AS. For information. We have today signed the
enclosed BB charter party to secure the vessel “MS Thjelvar” as a replacement
for MS Skagen. As known, Kystlink has also been in final negotiations for the
same vessel and with this we hope to pre-empt Kystlink with regard to the
employment of this vessel in order to be able to defend our routes out of
Vestfold. Kr. […].”192
189
Event # 401818, reply of Color Line dated 6 December 2006, p. 10.
190
Event # 371458, p. 43 (HZI 53 1/1), internal Color Line e-mail dated 12 November 2003, referring
to a meeting between Grenland Industriutvikling / Kystlink at which Color Line was informed that
Kystlink was looking for new tonnage in the market, and to the fact that Color Line, as a consequence
of this, had engaged a broker to look for corresponding tonnage: “Viser til vårt seneste møte med
Grenland lndustriutvikling / Kystlink. Som nevnt i møtet er Kystlink i markedet for ny ro-pax tonnasje
(20 knop, 12 - 1500 lm, pax sertifikat) ifm varslet utskiftning av M/S Boa Vista. Oppdraget er etter våre
opplysninger gitt til Brax Shipping. Vi har som konsekvens av nevnte engasjert […] i Simsonship til å
søke i markedet etter tilsvarende tonnasje (høy kvalitetl/levering snarest/bb). Dette som et alternativ til
M/S Skagen som idag går i paralell rute med Kystlink. (er idag fullt utnyttet nordover slik at Kystlink
tar markedsandeler / veksten i dette segmentet samt presser ratene)”).
191
On 12 November 2003, Color Line received information about possible vessels from the brokers
involved in the transaction, including information on MS Thjelvar to the effect, inter alia, that the b/b
(bareboat) rate was EUR 9000 per day (event # 371451, HZI 42). It appears that Color Line responded
to this offer: on 14 November, the owner of MS Thjelvar sent an e-mail to Color Line, advising it to
“react promptly” if it was interested in the vessel (event # 372630, MSG 0353, event # 371451, HZI
41). Only hours later, Color Line’s brokers e-mailed the owner of MS Thjelvar stating the terms that
Color Line had authorised them to offer for the vessel. The e-mail shows that the price offered had
been raised to EUR 12000 per day (event # 371451, HZI 39). Color Line only inspected MS Thjelvar
the following day (event # 371451, HZI 34). In a hand-written account of the technical inspection, the
vessel is said to be “in good repair, but some cosmetic internal and external upgrading should be
considered” (event # 371451 HZI 34). Color Line signed the charter party for MS Thjelvar on 17
November 2003 (event # 371451 HZI 46).
192
Event # 371089, p. 48 (JAA 50 1/1), e-mail from […] to board members, November 2003
(unofficial translation from Norwegian by the Authority: “Til styret i Color Line A S. Til orientering. Vi
har i dag undertegnet vedlagte BB certeparti for å sikre oss båten “M/S Thjelvar” som erstatning for
M/S Skagen. Som kjent har Kystlink også vært i avsluttende forhandlinger om samme båt og vi håper
49
185. By chartering the MS Thjelvar, Color Line acted in direct response to Kystlink’s
activities with regard to the Sandefjord – Strömstad route.
186. Kystlink’s application to the Municipality of Strömstad triggered discussions
between the Municipality and Color Line regarding the latter’s long-term
exclusivity to the area and installations.193 Color Line vigorously defended its
long-term exclusive agreements with the Municipality, seeking to maintain its
exclusivity and thereby prevent Kystlink from entering the market. From 9
January 2004 to 21 December 2005, in a number of letters to the Municipality
of Strömstad, Color Line and its lawyers invoked the exclusivity under the
agreements and threatened legal action to enforce it (see paragraphs 384 to 401
below for a more detailed account of these events).194
187. Notwithstanding such threats, on 21 December 2005, just prior to the end of the
initial 15-year term of the harbour agreement on 30 December 2005, the
Municipality of Strömstad decided to grant Kystlink access to Torskholmen (see
paragraph 47 above).195 The Municipality had concerns as to the compatibility
of the long-term exclusivity with competition rules.196 Kystlink began sailings
from Langesund to Strömstad on 1 November 2006.
188. Thus, Kystlink’s attempt to enter the market was successful (for a short period,
it turned out) in spite of Color Line’s attempts to block access, but only because
it was able to gain access to Torskholmen as a result of the Municipality of
Strömstad’s refusal to continue Color Line’s long-term exclusivity. If the
Municipality had succumbed to the pressure applied by Color Line on the basis
of the long-term exclusivity, such harbour access would not have been provided.
189. According to Kystlink, Color Line also sought to complicate the practical coexistence in the harbour area, inter alia by trying to prevent Kystlink from
getting access to specific areas and installations in the harbour, by appealing
Kystlink’s building permit for its customs building, and claiming that Kystlink’s
signposting in the harbour would require a building permit and should be
covered up outside the periods right before Kystlink’s departures.197
190. The Authority understands that Color Line has in fact continued to claim that
the decision to allow Kystlink access to Torskholmen was contrary to the
harbour agreement and has refused to sign a new agreement with the
Municipality of Strömstad. Indeed, as recently as June 2008, when a
prolongation of Kystlink’s two-year harbour agreement with the Municipality of
med dette å kunne komme Kystlink i forkjøpet med hensyn til disponeringen av denne båten for dermed
å kunne forsvare våre linjer ut ifra Vestfold. Mvh […]”).
193
See event # 401818, reply of Color Line dated 6 December 2006, annex 18, p. 22 et seq.
194
Event # 371458, p. 43 (HZI 53 1/1), internal Color Line e-mail dated 13 November 2003. Event #
401818, annex 18 to Color Line’s reply dated 4 December 2006, p. 22 et seq, p. 62 et seq, p. 75-76, p.
78-80.
195
See event # 401817, reply of Color Line dated 6 December 2006, annex 18, p. 31.
196
Event # 401818, p. 109-111.
197
Event # 492145, reply from Kystlink dated 19 September 2008.
50
Strömstad was under consideration by the Municipality, Color Line sought to
persuade the Municipality that there was no obligation under competition law to
grant Kystlink continued access, and that Color Line’s exclusive right of access
under the harbour agreement was still valid.198
5.4.5
Assessment of harbour alternatives
5.4.5.1 Introductory remarks
191. As stated above (paragraph 150), the negative effects that may result from longterm exclusive agreements and which EEA competition law aims at preventing
essentially concern anti-competitive foreclosure of other suppliers through the
raising of barriers to entry or expansion. The stronger competitors are and the
greater their number, the less risk there is that a party will be able, individually,
to exercise market power and foreclose the market.
192. In the context of passenger ferry services, such as those at issue in the present
case, if there exist sufficient alternatives for end-users from a demand-side
perspective, foreclosure is unlikely to be a real problem. In the present case,
however, Color Line faced no actual competition in the relevant market during
the entire period under examination. Yet, as already described, there were
several (unsuccessful) attempts at entry by potential new entrants during the
period under examination.
193. Nevertheless, if, from a supply-side perspective, there existed sufficient and
satisfactory alternative harbours from which potential competitors could
establish competing operations within a reasonable time frame, foreclosure
would not necessarily be a real problem.199
194. The Authority examines below possible alternative harbours during the relevant
period with a view to ascertaining whether potential competitors could have
established competing ferry operations within a reasonable time frame.
5.4.5.2 The Port of Strömstad
195. An overview of Strömstad harbour is provided in Photograph I below.
198
Event # 556768, annex 20 to Color Line’s Reply to the SO, p. 165 et seq, letter from Color Line to
the Municipality of Strömstad dated 10 June 2008.
199
See the Authority’s Guidelines on Vertical Restraints, paragraph 197.
51
Photograph I: Overview of Strömstad Harbour
Marina for pleasure craft Torskholmen Abba‐piren Nils Ljungqvists väg
Myren Röseberget / petrol storage facility Source: Google Maps 5.4.5.2.1 The Myren and Abba-piren area
196. Myren and Abba-piren lie in Strömstad harbour, south of Torskholmen, as
indicated in the photograph above. Photograph II below shows the layout of the
Myren/Abba-piren area in more detail as it appears today.
197. In the Myren/Abba-piren area there is currently a marina for small pleasure
craft. A rescue station has recently been built at Abba-piren. A company selling
pleasure craft, engines and boat equipment, and operating a petrol station for
boats and a service shop is located at Myren.200
198. Adjacent to Myren is Röseberget, where a petrol storage facility was built in
1964. It is supplied by vessel.201
200
www.axmarin.se.
201
According to a draft in-depth general plan for Strömstad dated 6 June 2006, p. 17, the petrol storage
facility is supplied with approximately 9000 tons of petrol per month by vessel and 15 truckloads of
petrol are lifted from the facility each day (the draft in-depth general plan of the central parts of
Strömstad and Skee is available at www.stromstad.se). See also event # 556818, p.180-185, attachment
54 to Color Line’s Reply to the SO, submitting p. 39-44 of the draft plan.
52
Photograph II: Myren/Abba-piren
Rescue station at Abba‐piren Abba‐piren / Marina for small pleasure craft AX Marin AB
Myren harbour
Terminal for petrol supply Source: Google Maps 199. No harbour facilities or quay structures from which ferry services could be
provided have ever existed at Myren/Abba-piren.202 Thus, unlike the public
harbour of Torskholmen, at Myren/Abba-piren there were no harbours in
operation during the relevant period from which ferry services could be
provided (nor are there currently).
200. In 2001, the Oslo City Court assessed alternative harbours to Torskholmen in
the period from 1998 to 2002, including Abba-piren and Myren, in the case
brought by Bastø-Fosen referred to above (paragraph 90).203 In its judgment, the
City Court refers to testimony from the Municipality of Strömstad
representative, who stated before the Court that there were no alternatives in
Strömstad for ferry activities, other than Abba-piren, but that there had been
intense political disagreement regarding the use of that area. The City Court
202
In addition, there does not appear to be sufficient space for a lining-up area for cars. Such an area
would therefore have to be created by way of filling compound.
203
Event # 410205, judgment of Oslo City Court, 5 October 2001, in particular at p. 40-43; see also
event # 370985, p. 98 (PAB 64 2/7), Color Line internal memo dated 24 February 2002 (summarising
the situation (i.e. the political process) in Strömstad and the possibilities of establishing new quay
facilities there).
53
concluded that both Myren and Abba-piren were unavailable for ferry activities,
and that Bastø-Fosen could not have gained access thereto.
201. The Municipality of Strömstad confirmed to the Authority in January 2007 that
Torskholmen was the only possible place of call within the port of Strömstad
when Kystlink applied for harbour access in 2003. It stated explicitly that
Myren and Abba-piren had not been developed for harbour purposes in the past
for environmental and esthetical reasons.204
202. In addition, the existence of the petrol storage facility at Myren was (and
continues to be) a complicating factor for the planning and construction of a
ferry harbour due to the necessary safeguards that would need to be taken if
passenger ferry services and the transport of dangerous substances were to take
place contemporaneously within the Myren/Abba-piren area.205
203. In conclusion, therefore, during the relevant period, Myren/Abba-piren was not
a harbour alternative on which potential new entrants could rely in order to
establish a route to Norway in competition with Color Line’s existing route
from Torskholmen.
5.4.5.2.2 Color Line’s arguments regarding the Port of Strömstad
204. In its Reply to the SO, Color Line argues that Myren was just as commercially
suitable for servicing a ferry route to Norway as Torskholmen, since the
location is virtually identical. It argues that there was considerable political
interest in developing Myren into a ferry harbour during the period under
examination, and that it was due to a lack of concrete attempts at establishment
that the plans did not come to fruition. Color Line also claims that the
Municipality of Strömstad assessed Myren at an earlier date and found it to be
technically capable of being developed for ferry services.206
205. In this regard, the Authority notes that it is correct that the question of
developing Myren/Abba-piren into a ferry harbour has been subject to
discussion. However, the argument that Myren was commercially suitable for
servicing a ferry route to Norway during the relevant period cannot be accepted
for the reasons already stated.
206. Further, in response to Color Line’s arguments in the Reply to the SO, a
detailed assessment of the discussions that took place with regard to
204
Event # 407261, p. 7, Municipality of Strömstad’s reply of 22 January 2007 to question 16 of the
Authority’s request for information (event # 399077). See also event # 440698, p. 15, newspaper article
in Bohusläningen dated 6 February 2007, in which a representative of Strömstad Municipality states
that plans exist in Strömstad to extend the harbour in the Myren area but that politicians have not yet
adopted any decision to extend the harbour (“Det finns planer i Strömstad på att bygga ut hamnen i
detta område […]. Men politikerna har annu inte tagit beslut om att bygga ut hamnen”).
205
Event # 410205, p. 40-42 of the judgment of Oslo City Court, 5 October 2001; see also draft indepth general plan of the central parts of Strömstad and Skee dated 20 June 2006, p. 42, available at
www.stromstad.se (“Inom överskådlig tid kommer även hanteringen av farligt gods (bensin) att fortgå
vilket måste beaktas i fortsatt fysisk planering inom denna del av staden.”).
206
Event # 553056, Color Line’s Reply to the SO, paragraphs 410-423 and 752-761.
54
Myren/Abba-piren confirms that that area was not a harbour alternative which
potential new entrants could rely on in order to establish a route to Norway in
competition with Color Line’s existing route from Torskholmen during the
relevant period.
207. The possibility of providing ferry services from Myren/Abba-piren was assessed
subsequent to Bastø-Fosen’s attempt to establish a route to Strömstad in the late
1990s. Between 1999 and 2001, Larvik-Strømstadlinjen also showed interest in
Myren (in addition to co-location with Color Line at Torskholmen).
208. On 28 March 2000, the Executive Committee of Strömstad Municipality
decided that for the time being no permission to extend Strömstad harbour
would be granted because it was considered that further establishment was not
possible without significantly affecting the physical environment. Further
analysis of the physical environment was therefore required, which was to be
carried out in the context of an ongoing process to establish an in-depth general
plan for the central parts of Strömstad Municipality.207
209. On 21 June 2001, the Environmental Committee (Miljönämden) of Strömstad
held a meeting regarding the possible establishment of a ferry route between
Larvik and Strömstad. The minutes of that meeting refer to a request by the
Environmental Committee, supported by the Municipal Executive Committee
(Kommunestyrelsen), in February 2001, that the Environmental Administration
(Miljöförvaltningen) assess the possibilities for co-ordinating several ferry
operators at Torskholmen, or alternatively at Myren.208
210. Following its assessment, the Environmental Administration found, in June
2001, that co-location at Torskholmen was not practically possible with the
volumes of traffic that had been estimated.209 Instead it was recommended that
Myren be developed into a harbour for general purposes.210
207
Event # 410205, p. 40 of the judgment of Oslo City Court (“Kommunestyret i Strømstad vedtok den
28.3.00 at man for tiden ikke ville gi tillatelse til ytterligere utbygging av havnen siden det ikke fantes
mulighet for flere etableringer uten at det ble gjort store inngrep i det fysiske miljøet. For å få et
overblikk over det fysiske miljøet og forutsetningene ville man foreta en analyse, noe man alt var i ferd
med å foreta i Miljøforvaltningen i kommunen i sammenheng med en “fördjupad översiktsplan” (FÖP)
for Strømstad tettsted.”).
208
Event # 553056, p. 277, attachment 82 to Color Line’s Reply to the SO (p. 1 of the minutes from a
meeting of the Environmental Committee on 21 June 2001).
209
Note that that estimate was based on the expected traffic after the introduction of the vessel Color
Viking by Color Line, which increased Color Line’s capacity on the route significantly. See Section
5.4.6.2 below regarding the capacity at Torskholmen.
210
See event # 553056, p. 277, attachment 82 to Color Line’s Reply to the SO, p. 1 of the minutes from
a meeting of the Environmental Committee on 21 June 2001 summarising the assessment of the
Environmental Administration (“…bedömer att en samlokalisering på Torskholmen med de
trafikvolymer som beräknas, inte er praktiskt genomförbar. Istället rekommenderas att utveckla Myren
till en hamnanläggning av universell karaktär”); and event # 407261, p.169-170, reply from Strömstad
Municipality (analysis by the Environmental Administration dated 10 June 2001 addressed to the
Environmental Committee).
55
211. The Environmental Committee decided to support that assessment. It adopted
the view, on 21 June 2001, that the area was a natural possibility for long-term
harbour development and decided that the assessment of the area, including the
environmental assessment, should be carried out separately from the ongoing
process of establishing an in-depth general plan for central parts of Strömstad,
and be given priority.211
212. In that regard, and with reference to Larvik-Strømstadlinjen’s interest in
Strömstad, an internal Color Line memorandum dated 22 August 2001 reported
that:
“Larvik-Strømstadlinjen has come one step closer to harbour access in
Strømstad. A proposal will be submitted to the Municipal Assembly
[kommunestyret] on 29.8 regarding the establishment of a committee which
shall assess specifically and quickly the environmental consequences of an
extension of Abba-piren and the construction of a lining-up area of cars at
Myren. The aim is that the assessment be finalised so quickly that the
municipality already this autumn will be able to provide an answer to new
players as to whether Strømstad is a possible port of call. It is likely that the
Municipal Assembly [kommunestyret] says yes to such a proposal on 29.8.”212
213. On 20 September 2001, a meeting took place in the Municipal Assembly of
Strömstad. Color Line was present at the meeting, and an internal memorandum
to Color Line’s CEO subsequently reported that:
“What an anticlimax this must be for the Larvik – Strömstad line. It had been
announced that the Municipal Assembly would discuss development of the
Myren area and say yes or no to harbour development. The Presidium (the
municipal executive committee) had attached a proposal to decide on the
question. This was changed before the actual meeting because it was clear
already before the meeting that a majority would not accept to open a debate
and to vote on a case which still was under assessment. The Presidium changed
the proposal before the meeting. It wanted the Municipal Assembly to discuss
the Myren development and give its approval to continue the assessment!!!! The
end of the farce was that Myren was debated and when this debate was over, it
was concluded that the ongoing assessment would be transferred from the
Environmental Committee via the Municipal Executive Committee to the
Municipal Assembly for a discussion on substance in a later meeting [of the
Municipal Assembly]. What happened yesterday was, in other words, a debate
on Myren as a future ferry harbour, but with no commitments. Signals from
211
Event # 553056, p. 279, attachment 82 to Color Line’s Reply to the SO (p. 4 of the minutes from a
meeting of the Environmental Committee on 21 June 2001).
212
Event # 371458, p. 166 (HZI 71 3/5), internal Color Line memorandum of August 2001 (unofficial
translation by the Authority: “Larvik-Strømstadlinjen har kommet et skritt videre mot havnetilgang i
Strømstad. Det skal fremmes et forslag til kommunestyret den 29.8 om nedsettelsen av et utvalg som
skal utrede særskilt og i løpet av kort tid de miljømessige konsekvensene ved en utbygging av Abbapiren og oppstillingsplass i Myren. Det tas sikte på at utredningen skal være ferdig så raskt at
kommunen allerede i høst skal kunne gi et svar til nye aktører om Strømstad havn er aktuell
anløpshavn. Det er trolig at kommunestyret sier ja til et slikt forslag den 29.8.”).
56
speakers were clearly unfavourable to the development. A ‘monument of the
tax-free era’ in the inner harbour was not deemed desirable. The interesting
thing was that many argued that a ferry/container harbour should be located at
Kålvik. They were of the opinion that one should initiate an assessment process
up there.”213 (emphasis added)
214. A subsequent internal Color Line memorandum dated 26 October 2001,
discussing the conditions on the connection between Norway and Sweden,
noted that:
“In a meeting in the Municipal Assembly of Strömstad on 20 September LarvikStrømstadlinjen did not get any clear positive answer regarding harbour access
by 1 June 2002. The Municipal Assembly decided to carry out a wider
environmental assessment of Strömstad harbour ...”.214
215. Shortly afterwards, in its judgment in October 2001 in the Bastø-Fosen case, as
already described, the Oslo City Court concluded that Myren and Abba-piren
were unavailable for ferry activities. It also noted that Larvik-Strømstadlinjen
had not been able to obtain harbour access in Strömstad (although, according to
the Municipality of Strömstad representative, it had been the most active
company seeking such access).215
216. In 2002, the assessment of the possible development of a ferry harbour at
Myren/Abba-piren continued. In February 2002, as part of its assessment of
Myren, the Municipality wrote to a number of potential ferry operators to
identify interest in operating a route to Strömstad.216
217. Scandilines confirmed its interest on 8 March 2002 and referred to Fosen
Trafiklag A/S as one of its partners. However, it stated that it would await the
assessment and conclusions of the Municipality of Strömstad, while at the same
213
Event # 370702, p. 222 (HZI 26 1/2), internal Color Line memorandum dated 21 September 2001
(unofficial translation by the Authority: “Hvilket antiklimaks dette måtte være for Larvik Strømstadlinjen. Det var bebudet at bystyret skulle behandle utbygging av Myren-området og si ja eller
nei til utbygging. Presidiet (bystyreledelsen) hadde lagt ved en innstilling om å ta stilling til
spørsmålet. Dette ble endret før selve møtet startet fordi det var klart allerede før møtet ble satt at
flertallet ikke ville akseptere å ta opp til debatt og votering en sak som fortsatt var under utredning.
Presidiet endret innstillingen før møtet startet. Man ønsket at bystyret skulle diskutere Myrenutbygging
og gi sin tilslutning til å fortsette utredningen!!!!. Enden på farsen ble at man debatterte Myren og da
denne debatten var ferdig, konkluderte man at pågående utredning ville gå fra Miljøutvalget via
formannskapet til realitetsbehandling i et senere bystyre. Det som kom fram i går var dermed en
uforpliktende debatt om Myren som framtidig fergehavn. Signalene fra de som talte var klart i disfavør
av utbygging. Man ønsket ikke et "monument" fra Tax-free-tiden liggende i indre havn. Det
interessante var at mange tok til orde for å legge ferge/kontainerhavn til Kålvik. De mente at man
måtte sette i gang en utredningsprosess der oppe.”).
214
Event # 371458, p. 158 (HZI 69 1/4: unofficial translation by the Authority: “I bystyremøte i
Strømstad 20 September fikk ikke Larvik-Strømstadlinjen AS noe entydig ja til havneplass til 1. juni
2002. Bystyret vedtok å foreta en videre miljøutredning av Strømstad havn …”).
215
Event # 410205, judgment of Oslo City Court, 5 October 2001, in particular at p. 40-43 of the
judgment.
216
Event # 553056, Color Line’s Reply to the SO, paragraph 417; event # 556818, p.152, attachment
50 to Color Line’s Reply to the SO.
57
time continuing internal discussions regarding development and assessment of
business concepts for a potential new ferry route to Strömstad.217
218. A summary of the assessment regarding development of a commercial harbour
in the port of Strömstad at Myren was drawn up by the Environmental
Administration on 22 May 2002. A number of concerns were assessed such as
technical installations, geotechnical issues, environmental concerns, risk
analyses relating to the existing petrol storage facility, economic concerns, the
opinion of the general public and architectural issues. Mention was made of a
public hearing held in March 2002.218 It was concluded that it was possible to
build a flexible harbour facility at Myren which would cater for existing and
future needs for sea transportation; that Myren was a resource for harbour
purposes in the long-term even if, politically, it were decided not to develop the
harbour for the time being; and, finally, that, economically, any development of
the area as a harbour would need to be linked to considerable interest (i.e. in
exploiting the harbour commercially), which, the summary considered,
existed.219
219. In November 2002, the Municipality of Strömstad applied for permission to
build a quay with accompanying facilities at Myren. The application was
granted by the Environmental Court (Vänersborg District Court) on 19 June
2003 (water judgment).220 The application comprised filling in the quay area
with 7500 m³ of filling compound, works on the seabed, the placement of rocks
as erosion protection measures, construction of a 165 metre long quay in two
parts (90 + 75 metres) and two floating breakwaters 30 and 60 metres long
respectively. However, those works were never carried out.
220. In the 2004 Budget for the Municipality of Strömstad it was stated that:
“The harbour development has come to a stop as regards the plans for Myren,
partly in relation to a new commercial harbour but also the harbour which shall
serve amongst others the ferry to the Koster islands and the Coast Guard are
moved into the future. Additional work is required to find suitable stages and
possibly other means of financing. The work is ongoing. The interest from
additional ferry operators still exists.”221
217
Event # 556818, p. 156, attachment 51 to Color Line’s Reply to the SO.
218
Event # 556818, p. 157-160, attachment 52 to Color Line’s Reply to the SO.
219
Event # 556818, p. 157, attachment 52 to Color Line’s Reply to the SO.
220
Event # 553056, Color Line’s Reply to the SO, paragraph 417; event # 556818, p. 160, attachment
53 to Color Line’s Reply to the SO.
221
The 2004 Budget for Strömstad Municipality, p. 28 available at www.stromstad.se (unofficial
translation from Swedish by the Authority: “Hamnutvecklingen har avstannat vad gäller planerna i
Myren, dels vad gäller ny handelshamn men även hamnanläggningen som skall betjäna bl. a.
Kosterfärjan och Kustbevakningen flyttas framåt i tiden. Här krävs ytterligare arbete att finna
lämpliga etapper och ev andra finansieringsformer. Arbete pågår. Intresset från ytterligare
färjeaktörer finns fortsatt.”).
58
221. The same statement was repeated in the 2005 Budget for the Municipality.222
222. A draft in-depth general plan for the central parts of Strömstad and Skee dated
20 June 2006 was submitted for public consultation from July to October
2006.223 In relation to Torskholmen – Myren, the draft plan states that:
“During the past few years the question of a future location for ferry traffic has
been assessed by the municipality. The locations which have been discussed
inside the central parts of Strömstad are Abba-piren and Myren harbour. In
order to shed light on the different options several different studies were
carried out in 2002. The studies found that it is fully technically possible to
build a flexible harbour facility at Myren which can accommodate present and
future maritime transport needs.
The Municipality views Myren as a resource for harbour purposes, which is
recommended in the General Plan of the Municipality. It has been politically
decided that the harbour area around the pleasure craft marina in the Myren
and Abba area is not currently an option for relocation/development of a
ferry facility, and that the whole Myren harbour area is strategic and set aside
for development of a commercial harbour. Abba-piren may for the time being
be used as parkland within the harbour’s development area.
In the foreseeable future the handling of dangerous substances (petrol) will
continue which must be taken into account in continued physical planning
regarding this part of the city. Until the construction of a commercial harbour
becomes topical the existing activities and the pleasure craft marina shall
remain as shall the newly created park.”224 (emphasis added)
223. More recently, in a programme plan for a detailed plan regarding the Myren
Industrial Area dated 17 February 2011 it is explained that, “Work with a view
to detailing the general plan for Strömstad is on-going. The in-depth general
plan for Strömstad and Skee was subject to renewed consultation between July
and October 2006. The Municipality aims at resuming the planning work during
222
The 2005 Budget for Strömstad Municipality, p.57, available at www.stromstad.se.
223
Event # 556818, p.180-185, attachment 54 to Color Line’s Reply to the SO (submitting p. 39-44 of
the draft plan). The entire draft in-depth general plan of the central parts of Strömstad and Skee is
available at www.stromstad.se.
224
Draft in-depth general plan of the central parts of Strömstad and Skee 2006, p. 42, available at
www.stromstad.se (unofficial translation from Swedish by the Authority: “Under de senaste åren har
frågan om framtida läge för färjetrafik utretts i kommunen. De lägen som diskuterats inom tätorten är
Abba-piren och Myrens hamn. För att belysa olika handlingsalternativ har under 2002 flera olika
utredningar utförts. Utredningarna har konstaterat att det är fullt tekniskt möjligt att i Myren bygga en
flexibel hamnanläggning som kan tillvarata nuvarande och kommande behov av transporter till sjöss.
Kommunen ser Myren som en resurs för hamnändamål, vilket rekommenderas i kommunens ÖP.
Politiska beslut har fattats om att hamnområdet kring småbåtshamnen i Myren och Abbaområdet i
dagsläget inte är aktuellt för flyttning/utbyggnad av färjeläge samt att hela Myrens hamnområde är
strategiskt och avsett för utveckling av en handelshamn. Abbapiren ska tillsvidare kunna användas som
parkmark inom hamnens utvecklingsområde. Inom överskådlig tid kommer även hanteringen av farligt
gods (bensin) att fortgå vilket måste beaktas i fortsatt fysisk planering inom denna del av staden. Tills
utbyggnad av handelshamnen aktualiseras ska befintliga verksamheter och småbåtshamn ligga kvar
liksom den nyanlagda parken.”).
59
2011…”.225 It appears, therefore, that as recently as February 2011
consideration of Myren/Abba-piren for possible ferry activities was still
ongoing and that the in-depth general plan had not yet been adopted.
224. In the light of the above, while the location of Myren may, in principle, as
argued by Color Line, be suitable for the provision of ferry services in
competition with the services provided by Color Line from Torskholmen, if it
were to be developed as a harbour, it follows from the evidence available,
including Color Line’s own contemporaneous statements and documents
submitted with its Reply to the SO, that development of Myren/Abba-piren to
accommodate ferry services was controversial politically, and for that reason
uncertain, and, further, that the potential for developing Myren for ferry
purposes was, at best, long-term in nature.
225. In addition, even assuming that the political and regulatory issues could have
been resolved, development of Myren/Abba-piren would in any case have
required substantial works and investments (including the necessary quay
structures and a lining-up area for cars), which would have taken time to carry
out.
226. In conclusion, therefore, Color Line’s arguments cannot be accepted.
5.4.5.2.3 Conclusion on the Port of Strömstad
227. In the light of all of the above, the Authority concludes that no alternative area
within the Port of Strömstad provided genuine possibilities for new entry during
the period under examination.
5.4.5.3 Kålvik
5.4.5.3.1 Introduction
228. Kålvik is located north of Strömstad. The distance from Strömstad centre to
Kålvik by car is approximately 20 km and takes around 24 minutes to drive
(Google Maps). See the map below.
225
Detaljplan för Myrens Industriomåde Strömstad Kommun – Planprogram 2011-02-17, p. 6,
available at www.stromstad.se (unofficial translation from Swedish by the Authority: “Det pågår ett
arbete med en førdjupning av översiktsplanen för Strömstad. Denna plan, Fördjupad översiktsplan för
Strömstad med Skee, har varit på förnyat samråd under juli – oktober, 2006. Kommunens avsikt är att
återuppta planarbetet under år 2011.”). See also:
http://www.stromstad.se/omkommunen/forvaltningar/kommunledning/oversiktligplanering/fordjupade
oversiktsplanerfop/stromstadtatortmedskee.719.html.
60
Map: Kålvik to Strömstad
Kålvik Svinesund
Nordby Source: Google Maps
229. Kålvik, which is a natural deep-sea area, was used for the construction of the oil
platform Skanska Doris in the mid-1970s by the company Skanska AB. In
connection with the construction of the oil platform, a quay was constructed at
Kålvik and the infrastructure at Kålvik was upgraded. Skanska retained
ownership of the Kålvik area after the construction of Skanska Doris but the
quay at Kålvik was not in regular use.226
226
According to a report by Norconsult commissioned by Color Line in 2001 (event # 451824), the
quay was not used after the construction of the oil platform in the 1970s (p.1, “Kaien har ikke vært i
bruk siden”). According to the judgment of the City Court of Oslo in the Bastø-Fosen case, at the time
of the judgment the area at Kålvik was used for storage and freight transport purposes, but no
indication of the intensity of that use was given (event # 410205, p. 43). According to an environmental
impact assessment carried out by Orveline in 2008 (event # 476613), the area had been in decay and
61
230. During the period under examination there was no ferry harbour in operation
and no harbour services provided to ferry companies at Kålvik. The situation at
Kålvik was therefore very different from the situation at Torskholmen which
was a public harbour in daily use. The question is thus whether Kålvik
nevertheless provided good possibilities for market entry for ferry companies
despite the fact that a ferry harbour would have had to be developed at Kålvik
before any market entry could take place.
231. In its SO, the Authority found that there were a number of regulatory and other
concerns which gave rise to difficulties that prevented Kålvik from being a
viable alternative to Strömstad, at least in the short to medium term.
232. In its Reply to the SO, Color Line argues, in essence, that Kålvik was a very
attractive harbour alternative. Color Line maintains that the fact that a new
entrant must expect to apply for various permits to establish a ferry route,
including permits concerning harbour access, cannot in itself disqualify a
harbour as a realistic alternative. It is of the view that, compared to
Torskholmen, obtaining the required permits for Kålvik was not considerably
more uncertain or time-consuming. Therefore, Color Line argues, Kålvik
constituted a realistic alternative to Torskholmen.227
5.4.5.3.2 The situation prior to the adoption of the in-depth general plan in
October 2003
233. The deep sea area at Kålvik and the deep sea channel leading up to it are unique
in Sweden. The Kålvik area and the channel were therefore designated by the
Swedish Maritime Administration as an area of national interest
(“riksinteresse”) for industrial activities which were dependent on a deep sea
harbour.228 The designated area included a larger area onshore between Kålvik –
Lunneviken and Nordby Köpcenter.229
234. The purpose of designating an area (or site) as being of national interest is to
protect the area or site in question against measures that may be prejudicial to
the establishment or use of that area (or site).230
had deteriorated until 2007 (p. 4) and no environmental permit had been obtained for the harbour
previously (p. 1).
227
228
Event # 468237, 2003 in-depth general plan for Högdalsnäset, p. 14-15, 18.
229
Event # 468237, 2003 in-depth general plan for Högdalsnäset, p. 18.
230
See Section 8 of the Swedish Environmental Code, which reads: “Land and water areas that are
particularly suitable as sites for facilities for industrial production, energy production, energy
distribution, communications, water supply or waste treatment shall, to the extent possible, be
protected against measures that may be prejudicial to the establishment or use of such sites. Areas that
are of national interest on account of facilities mentioned in the first paragraph shall be protected
against measures that may be prejudicial to the establishment or use of such sites”
(http://www.sweden.gov.se/content/1/c6/02/28/47/385ef12a.pdf). See also event # 464581, Delphi
opinion, p. 4/38.
62
235. It was only following a proposal in May 2000 by the Swedish Maritime
Administration (“Sjöfartsverket”) that a review of areas previously designated
of national maritime interest, including deep sea harbours, was carried out. In
October 2001, this led the Maritime Administration to decide, in relation to
Kålvik, that “more general exploitation of the area might also be possible”, and
that the possible use of Kålvik as a harbour should be assessed.231
236. The designation of Kålvik as an area of national interest for deep sea harbour
activities therefore excluded passenger ferry services prior to October 2001, and
a reclassification of the area would have been necessary before it could have
been developed into a ferry harbour. That seems also to have been the
assessment of Color Line at the time.232
237. In May 2002, the Municipality of Strömstad issued a General Plan for the
Municipality, including Kålvik, which, following the conclusions of the
Maritime Administration in 2001, decided that the possible use of Kålvik as a
harbour should be assessed and that an in-depth general plan should be
undertaken for that purpose.233
238. On 16 October 2003, the Municipality of Strömstad issued an in-depth general
plan covering the area around Kålvik.234 The plan took legal effect on 13
November 2003.
239. In the plan, the Municipality considered that the natural conditions and existing
quay facilities were suitable for harbour development. It was stated that:
“The Kålvik area has what is required for transformation into a harbour area.
The natural conditions for a deep harbour are good, which is why it is
considered that quay facilities can be constructed without damaging
appreciably the values of the water area. Kålvik will with construction of a new
road E6 and exit at Nordby get good transport conditions by the carrying out of
the upgrading of Road 1038 to Kålvik.”235
231
Event # 468237, 2003 in-depth general plan for Högdalsnäset, p. 18, referring to the 2001 decision
of the Swedish Maritime Administration (unofficial translation from Swedish by the Authority: “avses
ges en mera generell framtida användingsmöjlighet”). The decision of the Maritime Administration of
22 October 2001 entitled “Sjöfartens Riksinteressen” is available at http://www.sjofartsverket.se/sv/ebibliotek/Rapporter--remissvar1/2001/.
232
Event # 371458 p. 58 (HZI 57 1/1), e-mail from […] reporting in 2000 that the Ministry in
Stockholm needed to be involved in order to achieve a change of use for the deep sea quay area in
question (“Departementet i Stockholm må inn i bildet skal man få til en bruksendring på dette
dypvannskai-området”).
233
See event # 468237, p. 19, in-depth general plan of 2003 for Högdalsnäset. The 2002 General Plan
is available at:
http://www.stromstad.se/omkommunen/forvaltningar/kommunledning/oversiktligplanering/oversiktspl
an2002.238.html.
234
Event # 468237, in-depth general plan of 2003 for Högdalsnäset, a larger area in the Northern part
of Strömstad Municipality which includes Kålvik and Nordby.
235
Event # 468237, 2003 in-depth general plan, p. 19 (unoffical translation from Swedish by the
Authority: “Kålviksområdet har föutsetningar att omvandlas till ett hamnområde. De naturliga
63
240. The 2003 in-depth general plan explained that the national interest in Kålvik
would be maintained, but that the area could be given more general use in the
future.
241. The purpose of an in-depth general plan is:
“to assist users / exploiters who at an early stage can see if there are
possibilities to build in an area or if e.g. nature interests will be given more
weight.”236
242. The 2003 in-depth general plan would therefore have been of importance for a
potential new entrant considering developing Kålvik into a ferry harbour since
the plan allowed the Municipality the possibility to assess Kålvik as a possible
harbour.
243. However, in order to carry out the required assessment, the implications of the
contemplated use of Kålvik as a harbour had to be set out in a more detailed
manner in a concrete proposal for the use of the harbour site and the adjacent
land. It was also explained that, at the time of adoption of the in-depth general
plan, the Municipality did not have any such concrete plans but presupposed
that the Swedish State was prepared to continue the discussion if such plans
were presented.237
244. In addition, the 2003 in-depth general plan stated explicitly that:
“Future exploitation of Kålvik for harbour activities shall be preceded by a
detailed plan.”238
245. It also explained that:
“As regards the area which previously was set aside as a reserve area for deep
harbour dependent industry, and which covers a larger area between Kålvik –
förutsättningarna för en djuphamn är goda varför kajanläggningar bedöms kunne byggas ut utan att
vattenområdets värden påtagligt skadas. Kålvik kommer med utbyggnad av ny väg E6 och trafikplats
vid Nordby att få ett bra transportläge genom att upprustningen av väg 1038 till Kålvik genomförs.”).
236
Event # 468237, 2003 in-depth general plan, p. 3 and 19 (unofficial translation from Swedish by the
Authority: “Den fördjupade översiktsplanen är en overenskommelse mellan kommun och stat. En
fördjupad oversiktsplan är vidare till hjälp för exploatörer som i ett tidigt skede kan se om det finns
förutsättningar att bygga i ett område eller om t ex naturintressena kommer att väga över.”).
237
Event # 468237, 2003 in-depth general plan, p. 19 (“Kommunen anser att djuphamnsläget bör
kunne medge en mer generell använding i form av hamnområde och vill kunne pröva Kålvik som hamn.
För att en prövning ska kunne ske måste dock kommunen precisera innebörden av dette i ett konkret
förslag till nyttjande av hamnläge och tillhörande landområde. I nuläget har kommunen inga sådana
konkreta planer med utgår ifrån att staten är beredd att forsätta diskussionen om sådana
framlägges.”).
238
Event # 468237, 2003 in-depth general plan, p. 33 (unofficial translation from Swedish by the
Authority: “En framida exploatering av Kålvik för hamnverksamhet ska föregås av detaljplan.”). See
also event # 464581, Delphi opinion, p. 29/38.
64
Lunneviken and Nordby Köpcenter, currently a detailed plan can only be
established when such industry requires access to the deep sea area.”239
246. The 2003 in-depth general plan also explained that the national interest in the
deep harbour resource implied that both the water and land area should be
assessed as a whole.240
247. The adoption of the in-depth general plan appears to have been a step in the
direction of developing Kålvik into a harbour that could be used by a ferry
operator. However, the discussion above shows that further planning work at a
detailed level would have been required. Such work would have needed to be
coordinated among several public bodies. In that regard, the designation of
Kålvik as a place of national maritime interest continued to be a factor that had
to be taken into account (see paragraph 240 above).
248. In addition to a detailed plan, a potential developer would have needed to obtain
an environmental permit and, possibly, a water judgment in order to develop
Kålvik into a regular ferry harbour.
249. Under the Swedish Environmental Code, prior permission is required for
environmentally hazardous activities (environmental permit), which include
harbours used by ships of more than 1350 gross tonnage. The procedure for
obtaining such permission can be long and complex: a legal opinion
commissioned by the Authority estimates that the initial stages of the procedure,
that is, the consultation process and the submission of a permit application, take
from approximately six to 12 months. Thereafter, the processing of the
application, including hearings, is estimated to take from six to 18 months. If
the decision is appealed, the proceedings can last a further two to three years.241
239
Event # 468237, 2003 in-depth general plan for Högdalsnäset, p. 18 (unofficial translation from
Swedish by the Authority: “För det område som sedan tidligare är avsatt som reservområde för
djuphamnsberoende industri, och som omfatter ett större område mellan Kålvik – Lunneviken och
Nordby köpcenter, gäller idag att detlajplan får upprättas först när sådan industri ställer anspråk på
djupvattenläget.”).
240
Event # 468237, p.19: “Att djuphamnsresursen är av riskinteresse innebär att både vatten- och
landområde ska ses som en helhet. En felaktig använding av angränsande markområden kan försvåra
eller förhindra att vattenområdet kan nyttjast för det exklusive syftet. Detta innebär att olika
verksamheter mm temporärt kan få nyttja området men endast i sådana lägen och på sådant sätt att ett
framtida nyttjande av hele den exklusiva naturresursen inte omöliggörs.”
241
Event # 464581, legal opinion from Delphi, executive summary, p. 2. Appeals can, in principle, be
brought by environmental organisations and any affected parties. Similar projects in Bohuslän in recent
years have faced considerable resistance. Lysekil is one example: Lysekil Municipal Assembly’s
decision to allow the construction of a new ferry landing at Anderssons kaj in central Lysekil was
eventually overturned by the environmental courts (see below). A more recent example is the project
for a catamaran from Drammen to Ellös, just south of Lysekil (event # 471487). The decision by the
County Administrative Board granting an environmental permit was appealed to the Environmental
Court by a number of private individuals and a local company CEO (Bohusläningen:
“Ellösföreningen”, “Naturskyddsföreningen”). The Environmental Court (on 25 February 2008)
referred the case back to the County Administrative Board for a new assessment, on the grounds that
the environmental impact assessment had been incomplete (see event # 469546, decision by the County
Administrative Board and judgment by the Environmental Court). Color Line has argued (paragraph
732 of the Reply to the SO) that Kålvik is in an uninhabited area and, therefore, that no neighbours or
65
250. The Authority understands that in order to upgrade the existing harbour
facilities to meet the needs of bigger vessels such as those used on the
Sandefjord – Strömstad route, works on the seabed could be necessary, which
would, in turn, trigger the need for a “water judgment” from the Environmental
Court (vattendom: permission for water undertakings).242 The Authority
understands that the normal time frame for obtaining a water judgment is
approximately one year.243
251. An additional factor to be taken into account (after 2000) is the fact that the sea
outside Kålvik lies within a Natura2000 area. As a result, permission for
industrial activities may only be granted provided that neither the environment
nor the species under protection may suffer damage as a consequence thereof.244
A Natura2000 area is a natural habitat deemed to be worthy of protection
pursuant to Council Directive 92/43/EEC on the conservation of natural habitats
and of wild fauna and flora.245 The maritime environment in Kålvik is part of
the area Kosterfjorden – Väderöfjorden, which is protected because it “contains
the most species-rich and diverse maritime area in Sweden. Most of the reefs
are situated in deep water and are strongly sloping. The maximum depth of
water is 247 m. Kosterfjorden – Väderöfjorden contains around 200 species of
animals and 9 species of algae which in Sweden occur only in this site. It is the
only area in Sweden with coral reefs.” 246
252. In conclusion, prior to the adoption of its in-depth general plan in October 2003,
which took effect in November 2003, it must be regarded as very unlikely that it
other interested parties would have an interest in opposing the project. Although a direct comparison
between different cases is not possible, the Authority notes that at least one of the complainants in the
cases referred to above seems to have been an environmentalist group. In the Authority’s view, this
illustrates that the absence of neighbours does not guarantee that the project as such would be
uncontroversial.
242
Event # 464581, Dephi opinion, executive summary, p. 2 and 14. The requirement for a vattendom
was presumed by Orveline in the event that further works were to be carried out at Kålvik in order to
accommodate vessels comparable to the size of Color Line’s on the Sandefjord – Strömstad route: see
event # 461682, reply to question 11 in Orveline’s reply of 14 January 2008; and event # 488273,
Orveline’s letter dated 13 August 2008, reply to question 2d. It appears from Color Line’s internal
documents that Skanska was also of this view: see event # 370702, p. 222 HZI 26 1/2, where it was
reported that “... Skanska thinks itself that it will take no less than one year to obtain necessary permits
(water judgment) to start extending the quay...” (unofficial translation from Norwegian by the
Authority: “Skanska mener selv at det vil ta mints 1 år for å få nødvendige aksepter (vattendom) for å
starte utvidelsen av kaien…”). A water judgment was also considered to be required by the witnesses
from Skanksa and Strömstad Municipality in the Bastø-Fosen case before the City Court of Oslo (event
# 410205, p. 44 of the judgment).
243
It appears that both Skanska and Color Line considered one year as a reasonable time frame for
obtaining a water judgment: see, respectively, event # 370702, HZI 26, internal Color Line
memorandum dated 21 September 2001, and event # 564200, presentation by Mannheimer Swartling at
the oral hearing, part 4d.
244
Environmental Code, Section 28b, Chapter 7; see event # 464581, Delphi opinion, executive
summary, p. 2.
245
Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild
fauna and flora, OJ L 206, 22.7.1992, p.7.
246
Event # 471485, http://w3.vic-metria.nu/n2k/jsp/main.jsp.
66
would have been possible at all to operate passenger ferry services from Kålvik
within a reasonable time frame due to the regulatory obstacles that existed. At
the very least, a potential new entrant faced a heavy regulatory burden prior to
the adoption of the 2003 in-depth general plan and could not expect to be able to
enter the relevant market in the short to medium term using Kålvik as a ferry
harbour on the Swedish side.
5.4.5.3.3 The situation after the adoption of the in-depth general plan in
October 2003 until the end of 2005
253. As explained above, at the time of adoption of the in-depth general plan, the
Municipality of Strömstad did not have any concrete plans for use of the
harbour site and adjacent land at Kålvik. Regulatory obstacles therefore
continued to exist even though an in-depth general plan had been adopted.
254. Indeed, at the end of 2006, the Municipality confirmed that no harbour
developments had yet been realised at Kålvik.247 When asked to identify legal
or regulatory barriers that could prevent the execution of works necessary at
Kålvik in order to accommodate international car ferries, the Municipality stated
that: “the land is not owned by the municipality, a detailed plan is lacking,
national interests such as nature and recreational areas exist which today are
in conflict with exploitation for traffic purposes”.248
Private ownership of Kålvik
255. As regards the private ownership of Kålvik, it appears that this factor has played
a role as an impediment to new entry during the relevant period. Color Line has
argued that the landowner, Skanska, seems to have been very interested in
achieving an agreement with a ferry operator at Kålvik during the entire period
under examination.249
256. However, documents obtained by the Authority during the inspection carried
out at Color Line’s premises provide a more nuanced picture. In an e-mail from
[…] to Color Line management in June 2003, it was reported that Skanska
hesitated to initiate cooperation with Larvik-Strømstadlinjen but, on the other
hand, that it had asked whether a container harbour at Kålvik would interest
Color Line.250 In September 2001, it was reported internally in Color Line that
Skanska would welcome Color Line as developer of Kålvik but that Color
247
Event # 408737, p. 8 (unofficial translation from Swedish by the Authority: “Det är riktigt att någon
hamnanläggning i Kålvik inte forverkligats.”).
248
Event # 408737, p. 8 (unofficial translation from Swedish by the Authority: “Marken ägs inte av
kommunen, detaljplan saknas, riksintressen såsom natur och friluftsområden föreligger som idag
kolliderar med exploatering för trafikändamål.”).
249
250
Event # 371458, p. 58 (HZI 57 1/1: “Skanska vegrer [s]eg for å gå inn i noe samarbeid med Larvik
– Strømstad-linjen, og spør om det er interessant for oss med en containerhavn i Kålviken.”).
67
Line’s interest in Kålvik was limited to blocking that harbour for other
players.251
257. In contrast, it is recalled that Larvik-Strømstadlinjen was welcomed at the
public harbour of Lysekil (although it faced regulatory obstacles there – see
Section 5.4.5.4 below).
258. Consequently, if the Kålvik area had been municipal land and the Municipality
of Strömstad had launched a plan to develop Kålvik as a public harbour, a
potential new entrant is likely to have faced a significantly different situation at
Kålvik.
A detailed plan was required
259. In June 2007, the Municipality of Strömstad informed the Authority that in
order to engage in harbour activities in Kålvik a detailed plan was required in
order to regulate the change in use of the land (from an area of “national
interest” for activities depending on a deep sea harbour).252 As explained above,
this is consistent with what was expressly set out in the Municipality’s
contemporaneous planning documents (see paragraph 244 above).
260. The Municipality also explained to the Authority that the time frame for a
possible change of land use was difficult to estimate since other authorities
(such as the county administrative board and the environmental court) also
needed to give the go-ahead, and also because there had to be a willingness on
the part of both the Municipality and the harbour owner to take things forward.
The Municipality estimated that it would, in any event, take more than three
years to obtain the necessary regulatory permits, including the adoption of a
detailed plan for the area and an environmental permit.253
261. Thus, the Municipality, which has the sole power to initiate the detailed
planning process,254 and which would have a key role in the planning works that
needed to be carried out before a ferry harbour at Kålvik could be realised, itself
considered as late as 2007 that it would take several years before a ferry harbour
could be realised.
251
Event # 370702, p. 222 (HZI 26 1/2: “Skanksa ønsket oss velkommen som utbugger av Kålvik […]
Vår interesse i Kålvik vil derfor være begrenset til å blokkere den havnen for andre aktører.”).
252
Event # 432050, p. 1-2 (“För att få bedrive hamnverksamhet i Kålvik krävs en detaljplan som
reglerar denna förändrade markanvändingen. Nu gällande markanvänding är riksinteresse för
djupvattenläga dvs det som en gång på 70-talet var en verksamhet på platsen som var byggnation av
oljeplattformar för Nordsjön.”).
253
Event # 421145, the Authority’s letter dated 20 June 2007, question 5, and event # 432050, reply
from the Municipality of Strömstad of 31 August 2007, p. 1-2 (“Tidsramen för en eventuell förändrad
markanvänding är svår att sia om då det krävs jakande svar från andra myndigheter såsom
länstyrelsen och miljödomstolen samt att kommunen och markägaren är interesserade att driva frågan.
Uppskatningsvis pratar vi om mer än 3 år i vilket fall.”).
254
Event # 464581, Delphi opinion, p. 30/38 (confirming that no private entity can force a municipality
to initiate such a planning process).
68
262. The Municipality also reported in 2008 that the scope and shape a harbour
facility at Kålvik could take had not been assessed in any detailed plan and that
no such planning works had been initiated.255
263. In the light of these considerations, it is hard to conceive that a potential new
entrant in 2004 or 2005 had reason to believe that entry into the relevant market
could take place using Kålvik in a significantly shorter time frame than that
estimated by the Municipality of Strömstad itself in 2007.
5.4.5.3.4 Road access to Kålvik and Nordby
264. Road access to Kålvik and Nordby was regarded as problematic: the 2003 indepth general plan considered that upgrading of the access route to
Kålvik/Nordby was necessary. The plan stated that Kålvik “will get” good
transport connections once the road infrastructure around Nordby was upgraded
in connection with the plans for the new shopping centre.256 Statements in the
2003 in-depth general plan also indicate that access via the E6 motorway and
parking facilities at Nordby needed to be upgraded; heavy traffic jams were
common during weekends and in summer.257
265. However, the upgrading of the roads to Nordby was not completed until June
2005 when the bridge across Svinesund and the new local road network were
opened.258
266. According to Color Line, the local problems surrounding the access road to
Nordby from the E6 were resolved by means of dedicated traffic lights just after
the in-depth general plan for the area was adopted, that is after October 2003
(paragraph 719 of Color Line’s Reply to the SO). Later, however, those traffic
255
Event # 469954, reply to question 7 from the Municipality of Strömstad dated 13 March 2008
(“Därimot är det inte prövat genom en detaljplanelägging vilken omfattning och utforming en
hamnanläggning skulle kunna få här. Den prövningen är inte gjord och finns inte heller något
uppstartat arbete med.”).
256
Event # 468237, in-depth general plan of 2003 for Högdalsnäset, p.19: “Through the development of
the new E6 motorway and the new junction at Nordby, Kålvik will acquire a good transport situation
by the completion of the upgrading of road no. 1038 to Kålvik” (unofficial translation from Swedish by
the Authority: “Kålvik kommer med utbyggnad av ny väg E6 och trafikplats vid Nordby att få ett bra
transportläge genom att upprustning av väg 1038 till Kålvik genomförs.”).
257
Event # 468237, in-depth general plan of 2003 for Högdalsnäset, p. 21: “In the summer months and
during some peak weekends significant traffic problems arise in the crossing between road no. 1038
and road E6, with heavy traffic jams as a result” (unofficial translation from Swedish by the Authority:
“Under sommarmånaderna och vissa storhleger uppstår stora trafikproblem i korsningen mellan väg
1038 och väg E6 med långa köer som följd.”).
258
A press release in 2006 issued by the Olav Thon group, the owners of the Nordby Shopping Center,
also indicates that there were infrastructure problems prior to the upgrade: “Nordby Shopping Center
opened in June 2004. In June 2005 the bridge across Svinesund and the new local road network were
opened. This significantly improved the accessibility of the centre, and, in 2005, it achieved a turnover
of 919 million [NOK], up from 494 million [NOK] in 2004”, event # 468239, press release from Olav
Thon-gruppen of 4 January 2006, p. 4 (unofficial translation from Norwegian by the Authority:
“Nordby Shopping Center åpnet i juni 2004. I juni 2005 ble ny Svinesund-bro og nytt lokalvegsystem
åpnet. Gjennom dette har senterets tilgjengelighet bedret seg betydelig, og senteret hadde i 2005 en
omsetning på 919 mill, opp fra 494 mill i 2004.”).
69
lights were replaced by a roundabout (see the left hand photograph at paragraph
700 of Color Line’s Reply to the SO).
267. As a matter of fact, there is still doubt as to whether the access road to Kålvik is
sufficiently developed for ferry traffic of a size comparable to Color Line’s in
Strömstad harbour. When Orveline obtained an environmental permit for
extended activity at Kålvik in 2009 (see below, Section 5.4.5.3.7), the Road
Administration made the following observations:
“Road 1038 [the road down to Kålvik] will experience a considerable increase
in traffic and vehicle flows of up to 2000 vehicles per day and will require
higher demands with regard to design and capacity than what the road has
today. In order for the Road Administration to take a positive stance to an
extension of activities in the harbour, a number of measures may be needed to
improve the road standard. The measures which are needed as a result of the
increased harbour activity will have to be clarified in consultation with the
Road Administration and be paid for in their entirety by the developer of the
harbour.”259
268. The Authority therefore considers that the road infrastructure from Kålvik
towards Strömstad and the Norwegian border was underdeveloped, at least for a
significant part of the period under examination. This has two consequences.
Firstly, this must have reduced the attractiveness of Kålvik as such from the
point of view of potential new entrants. Secondly, as long as serious congestion
problems existed at Nordby it would appear doubtful that the public authorities
would allow the development of a ferry harbour for passenger traffic to
commence at Kålvik at all.
5.4.5.3.5 Conclusion on regulatory obstacles and uncertainties
269. As described above, a new entrant seeking to enter the relevant market using
Kålvik as a ferry harbour during the period under examination would have faced
significant regulatory and other difficulties and uncertainties. It would have had
to reckon with the risk of procedures possibly lasting for several years before
construction works could even begin.
270. The Authority is of the view that those obstacles presented a major barrier to
Kålvik offering a genuine alternative for new entry during the period under
examination.
259
Page 6 of the environmental permit, submitted by Orveline as an attachment to event # 527712 and
by Color Line as event # 526889 and event # 556818, p. 141 et seq (attachment 47 to Color Line’s
Reply to the SO) (unofficial translation from Swedish by the Authority: “Väg 1038 kommer att få en
betydande trafikökning och fordronsflöden på upp emot 2000 fordon per dygn kommer att ställa högre
krav på utformning och kapacitet än vad vägen har idag. För att Vägverket ska kunne ställa sig
positiva till en utökning av hamnverksamheten kan ett antal åtgärder behövas för en förbättrad
vägstandard. De åtgärder som behövs till följd av den utökade hamnverksamheten får klarläggas i
samråd med Vägverket och får till sin helhet bekostas av hamnexploatören.”).
70
5.4.5.3.6 The attractiveness of Kålvik as a destination during the relevant
period
271. Kålvik is not a populated area. At least prior to the opening of Nordby Shopping
Center, in June 2004, the shopping opportunities at Nordby were very limited
compared to the situation today. In addition, there has never been any
possibility of buying alcohol in Nordby (other than low-alcohol beer).
272. Color Line argues that in the SO the Authority seems to emphasise that
Nordby/Kålvik was not an attractive destination before the development of the
new shopping centre at Nordby in 2004 and claims that that is not correct. It
argues that Nordby was described in the Norwegian national press in the mid1990s as “one of the landmarks of the border traders”, and attaches several
articles from the Norwegian newspaper Dagens Næringsliv concerning the
shopping facilities at Nordby between 1995 and 1997.260
273. From those articles it appears that in 1995 a shopping centre had existed at
Nordby for 10 years. However, it only consisted of an ICA grocery store, a Q8
petrol station and a road restaurant and motel located along the E6 (taken over
by the road restaurant and motel chain Rasta that year).
274. The new Nordby Shopping Center opened in June 2004, merged with the old
shopping centre in 2007, and expanded further in 2008-2009. The turnover of
the new shopping centre developed as follows.261
Turnover Development at Nordby Shopping Center, 2004 to 2008.
Year
Turnover (MSEK)
2004
424
2005
917
2006
1064
2007
1904
2008
2094
275. By 2010, the turnover of the shopping centre had increased to NOK 3.56
billion.262
260
Event # 553056, Color Line’s Reply to the SO, paragraphs 711-712. See also paragraph 719 where
Color Line claims that the shopping centre at Nordby was an important attraction for Norwegian
customers long before the expansion of the centre in 2004.
261
Event # 552153, extracts from presentation of Nordby Shopping Center (submitted to the Authority
by Orveline as event # 527712).
71
276. It is true, as argued by Color Line, that border shopping has also been possible
at Svinesund, closer to the Norwegian border than Nordby.263 However, those
shopping possibilities cannot be compared to the current Nordby Shopping
Center, which Color Line itself has referred to as “Norway’s largest” and which
is one of the largest shopping centres in the Nordic countries after the last
extension, which was completed in 2009.264
277. While shopping possibilities at Nordby and Svinesund did exist prior to the
development of Nordby Shopping Center, the Authority cannot see, in the light
of the above, how Kålvik provided any advantage over Strömstad harbour in
this respect.
278. On the contrary, Strömstad was, and remains, the only city centre in this area of
Sweden. It was, and remains, the only place with an alcohol monopoly. In
addition, the 24-hour rule, which applies to tax-free sales aboard ferries under
Norwegian legislation, does not apply with respect to taxed purchases at the
Swedish alcohol monopoly. Thus, in order to respect this rule, ferry passengers
who travel back to Norway the same day and who wish to benefit from lower
alcohol prices in Sweden will have to visit Strömstad city centre.
279. For shopping-minded ferry passengers who intended to drive back to Norway,
arriving at Strömstad harbour would make a combined visit possible to the
centre of Strömstad and to the Nordby and Svinesund areas since the latter areas
are en route to the Norwegian border. For passengers arriving at Kålvik,
however, such a combined visit would be more cumbersome and lengthy as a
detour southward to Strömstad would be required.
280. Kystlink has stated that a competitor would be disadvantaged by being outside
the city, since it is a Norwegian tradition to travel to Strömstad to shop, and
that, in order to accommodate the wishes of its passengers, in particular those
not travelling by car or bus, calling at a harbour such as Strömstad would be the
best choice.265 That has been criticised by Color Line.266
281. However, Color Line’s criticism focuses on the shopping possibilities at Nordby
today, not on the situation prior to 2005. It is common ground that Strömstad
has been a destination often visited by Norwegians. Strömstad has been a city
with attractions, shopping possibilities, cafés, restaurants and accommodation
possibilities. Moreover, even today (December 2011) Color Line states on its
website under the heading “Strömstad and Bohuslän” that:
262
Olav Thon 2010 Annual Report, p. 13, available at www.olavthon.no. See also event # 549890,
presentation of Nordby Shopping Center, p. 7 according to which the shopping area was 85 000 m² and
consisted of 115 shops and parking capacity for 3500 cars.
263
264
Event # 553056, Color Line’s Reply to the SO, paragraph 377 and section 11.3.2.2.2.
265
Events # 445223 and 439592 (attached pictures of Kålvik can be found in events # 445221, 445219,
445217 and 445215).
266
Event # 553056, Color Line’s Reply to the SO, paragraphs 97, 704 and 709.
72
“The coastal town which is much more than cheap border shopping! Cosy
shops, the harbour with fishing boats, the idyllic Koster islands and the popular
spa- and conference hotels, make the town exciting all year around.”
282. This text was until recently accompanied by the photograph below.
Photograph from www.colorline.no.
283. Thus, it appears that Color Line still markets Strömstad as an exciting
destination to travel to. On the other hand, there does not seem to be any
mention of Nordby Shopping Center on its website.
284. Further, in its 2002 Annual Report Color Line stated that:
“The market trend whereby an increasing number of passengers consider the
destination as an integrated part of the cruise experience enhances the
importance of terminals located in the centres and forming part of the centre
of the cities. There should be attractions, shopping possibilities and cafés,
restaurants and accommodation possibilities in or in the immediate vicinity of
the terminal facilities.”267 (emphasis added)
285. Color Line argues in its Reply to the SO that the Authority has taken that
statement out of context and that it must be considered in the context of Color
Line’s overall activities, not the Sandefjord – Strömstad route in particular.268
286. However, an internal Color Line memorandum concerning the threat of
competition on the Sandefjord – Strömstad route in particular, and the question
of renewal of tonnage in the year 2000 on that route, stated that:
267
Color Line’s Annual Report 2002, p. 15-16 (unofficial translation from Norwegian by the Authority:
“Markedstrenden der en økende andel av passasjerene vil se destinasjonen som en integerert del av
cruiceopplevelsen, forsterker betydningen av at terminalen ligger sentralt og inngår i byutvikling og
byenes sentrumsfunksjon. Det bør finnes attraksjoner, shoppingmuligheter og serverings- og
overnattingstilbud i eller i umiddelbar nærhet av terminalanlegget.”). A similar statement was made at
p. 11 of the Report.
268
73
“Color Line can compete with potential intruders through market dominance
and by controlling terminals close to the centre of both cities”.269
287. The latter contemporaneous statement contradicts Color Line’s arguments in its
Reply to the SO and indicates that Strömstad as a destination was a factor that
was given weight.
288. In conclusion, therefore, the Authority considers that from the viewpoint of a
new entrant Kålvik as a destination posed a degree of uncertainty with regard to
potential demand for ferry services that Strömstad harbour did not pose.
5.4.5.3.7 Recent developments at Kålvik
289. In its Reply to the SO, Color Line refers to the recent activities of Orveline at
Kålvik. It has referred to the fact that Orveline was able to obtain an
environmental permit in the course of about one year, that a detailed plan was
not required for the activities initiated by Orveline, and that the works carried
out at the quay at Kålvik did not require a water judgment (vattendom).270
290. In this regard, the Authority notes that Orveline concluded an agreement on 16
May 2007 with Skanska which gave it access to Kålvik. Orveline’s operations at
Kålvik commenced in April 2008 with a vessel with a gross tonnage of only
1169.5, a fairly small vessel, and significantly smaller than the vessels operated
by Color Line on the Sandefjord – Strömstad route. Those operations required
an upgrade of the existing facilities at Kålvik, but did not require any water
works to be undertaken.271
291. Orveline explained to the Authority in January 2008 that the harbour was sized
for vessels below 1350 tons, which did not require any environmental permit.272
292. It appears that Orveline applied for an environmental permit in 2008 for
procedural reasons. It did not have any concrete plans to introduce larger vessels
at Kålvik with which it could enter the relevant market in the present case.273
269
Event # 371507, p. 83 (HZI 98 1/2) (unofficial translation from Norwegian by the Authority: “Color
Line kan konkurrere med potensielle inntrengere gjennom markedsdominans og ved å kontrollere
sentrumsnære terminaler i begge byer”).
270
Event # 553056, Color Line’s Reply to the SO, paragraphs 382-399, 732, 736, and 739.
271
Event # 461682, p. 8, annex I to Orveline’s reply dated 14 January 2008, submission to the
Municpality of Strömstad in 2007 entitled “Etablering av ny passagerarhamn i Kålvik, Strömstad
Kommun”.
272
Event # 461682, Orveline’s reply dated 14 January 2008, p. 4 (Q7). See also event # 461682, p. 7,
annex I to Orveline’s reply dated 14 January 2008, submission to the Municipality of Strömstad in
2007 entitled “Etablering av ny passagerarhamn i Kålvik, Strömstad Kommun”, where it is stated: “As
a start, rebuilding is proposed whereby the harbour is given capacity for vessels up to 1 350 GRT”
(unofficial translation from Swedish by the Authority “lnledningsvis föreslås en ombyggnad där
hamnen ges kapacitet för fartyg upp till 1 350 BRT.”).
273
Event # 461682, Orveline’s reply dated 14 January 2008, p. 6 (Q11), where Orveline stated that it
did not know whether it would be of interest to change vessel (“Vi vet idag inte om det blir aktuellt att
byta fartyg”).
74
293. Orveline started preparing an application for an environmental permit in spring
2008,274 and applied for a permit on 25 June 2008.275 The permit was granted on
27 March 2009.276 That decision was not appealed.
294. When asked to explain the background to its application for an environmental
permit,277 Orveline stated:
“The background is to be able in the future to have larger tonnage in the
harbour and that existing activity can apply before 30 June 2008 and thereafter
maintain existing activity (and new) until a decision in the matter has been
made by the County Administrative Board.”278
295. When asked to describe any works and/or projects planned to upgrade the
existing harbour facilities, and whether it expected that any planned works
would require a detailed plan of the area or other permits (for example, a
vattendom),279 Orveline stated:
“No construction works will be initiated in the harbour as a result of the
application for environmental permit. Strömstad municipality has pointed out in
its decisions that the area shall be subject to a detailed plan before building
permits for facilities and buildings can be expected [to be granted]. This
prevents in practice the possibilities to expand with for example other ferry
traffic due to the need for a terminal building etc. until a detailed plan has
entered into force.”280
296. The Authority then pointed out to Orveline that according to the environmental
impact assessment (p. 9) no works should be necessary in order to allow vessels
of more than 1350 gross tonnage to call at Kålvik, and asked whether vessels
such as those used by Color Line or Kystlink could call at Kålvik as soon as the
274
Event # 556818, p. 137, attachment 46 to Color Line’s Reply to the SO, according to which
Orveline consulted the County Administrative Board on 21 February 2008 and on 3 April 2008
published an advertisement in the local press about its plans.
275
Event # 553056, Color Line’s Reply to SO, paragraph 388; and event # 556818, p. 137-140,
attachment 46 of Color Line’s Reply to the SO.
276
Event # 526889, submitted to the Authority by Color Line on 20 July 2009 (event # 526890); and
event # 556818, p. 141 et seq., attachment 47 to Color Line’s Reply to the SO.
277
Event # 477901, question 2.b.
278
Event # 488273, Orveline’s reply dated 8 August 2008 (unofficial translation from Swedish by the
Authority: “Bakgrunden är att i framtiden kunna ta större tonnage i hamnen samt att befintlig
verksamhet kan söka före 30 juni 2008 och derefter upprätthålla befintlig verksamhet (och ny) fram till
beslut fattas i frågan av Länsstyrelsen.”).
279
Event # 477901, question 2.c.
280
Event # 488273, reply from Overline, p. 1 (answer to question 2.c) (unofficial translation from
Swedish by the Authority “Något anläggningsarbete som följd av ansökan om miljötillstånd kommer
inte att påbörjas i hamnen. Strömstads kommun i sina beslut påpekat att området skall underställas
detaljplan innan bygglov för anläggningar och byggnader kan påräknas. Detta hindrar i praktiken
möjligheterna att utöka med exempelvis annan färjetrafik på grund av behovet av terminalbyggnader
m.m fram till en detaljplan har vunnit laga kraft.”).
75
permit was granted, without significant additional construction works, on the
quay or underwater, being required.281 Orveline replied:
“If larger tonnage (for example ferries that call at Strömstad today) shall be
able to use the harbour dredging is amongst others required which in turn
requires permission for waterworks [i.e. a water judgment].”282
297. It follows from the environmental permit granted to Orveline that:
“The activity shall take place mainly in accordance with what the applicant has
stated in the application documents and otherwise undertaken in this case if not
otherwise specified by the conditions below.”283
298. It is also stated in the permit that:
“Quay facilities which exist in the harbour today are considered to be able to
manage the new activity without further amendments. Thus, new facilities will
not be established as a result of the application for an environmental permit.”284
299. Thus, it appears that the existing quay facilities, which have been upgraded by
Orveline for a small scale project, cannot necessarily be extended under the
existing environmental permit.
300. It is noted that Orveline’s ferry activities at Kålvik came to an end early in 2009
because the activities did not comply with the applicable tax-free rules.285 As far
as the Authority is aware, no further ferry activity has taken place at Kålvik.
301. In the light of the above, it appears that even if the environmental permit
obtained by Orveline in 2009 allowed Orveline to introduce vessels above 1350
gross tonnage at Kålvik and 2700 calls a year,286 all regulatory issues were not
settled. Nevertheless, it seems possible that due to the developments at Kålvik
in recent years, the planning and regulatory obstacles that remain may be less
significant than those which existed prior to those developments.
281
Event # 477901, question 2.d.
282
Event # 488273, reply from Overline, p. 1 (answer to question 2.d). (unofficial translation from
Swedish by the Authority: “Om större tonnage (exempelvis färjor som idag trafikerar Strömstad) skall
kunne nyttja hamnen kråvs bland annat muddring som i sin tur kräver tillstånd för vattenverksamhet.”).
283
Event # 527712, reply from Orveline, p. 1 of the environmental permit (unofficial translation from
Swedish by the Authority: “Verksamheten ska bedrivas i huvudsaklig överenstämmelse med vad
sökanden angivit i ansökningshandlingarna och i övrigt åtagit sig i ärendet om inte annt frangår av
nedanstående villkor.”).
284
Event # 527712, reply from Orveline, p. 5 of the environmental permit (unofficial translation from
Swedish by the Authority: “Kajanläggningar som idag finns inom hamnen bedöms kunna klara den
nya verksamheten utan ytterligare förändringar. Således kommer inte nya anläggningar att tillföras
området som en följd av ansökan om miljötillstånd.”).
285
Judgment by the City Court of Oslo on 12 April 2011, Orveline AB v Ministry of Finance.
286
76
302. Against this background, the Authority cannot see that the developments at
Kålvik from 2007 onwards, and the environmental permit which was granted to
Orveline in March 2009 in particular, call into question the conclusions which
have been drawn above regarding the extent to which Kålvik could have been
used by a potential new entrant in order to enter the relevant market in the
present case during the period under examination.
303. In conclusion, therefore, Color Line’s arguments regarding the developments at
Kålvik after 2007 do not change the Authority’s conclusion that Kålvik did not
offer a genuine alternative for new entry to a potential entrant seeking to
compete with Color Line on the relevant market during the period under
examination.
5.4.5.3.8 Conclusion on Kålvik
304. The Authority concludes that there were a number of factors which, taken
together, prevented Kålvik from providing genuine possibilities for new entry
within a reasonable time frame during the period under examination.
5.4.5.4 Lysekil
5.4.5.4.1 Assessment of Lysekil as a harbour alternative
305. Lysekil is located approximately 95 km south of Strömstad (approximately a
100 minute drive) and approximately 110 km from the Norwegian border.287
Lysekil is a public port. There are no public ports between Strömstad and
Lysekil.288 The location of Lysekil is indicated on the map below.
287
All distances and driving times according to today’s road standards were obtained from Google
Maps. Prior to road improvements in recent years driving time from Strömstad to Lysekil was
somewhat longer.
288
SJÖFS 1988:5 available at http://www.sjofartsverket.se/, see also event # 464581, Delphi opinion,
p. 3/38.
77
Sandefjord ‐ Strömstad
Larvik ‐ Lysekil 306. As can be seen from the map, in comparison with Strömstad Lysekil is
disadvantaged by its location. The duration of a crossing from Norway to
Lysekil would be substantially longer than the Sandefjord – Strömstad crossing:
according to Color Line, a crossing from Larvik, which is south of Sandefjord,
to Lysekil would take up to four hours.289 Lysekil is also further from Norway
by car than Strömstad, and it is further to the E6 motorway. Therefore, the total
journey time would be significantly longer, in particular for the many
passengers who take the ferry from Norway to Sweden and then drive back to
Norway, thus making the route less attractive for passengers.
289
According to Color Line’s own internal calculations (see below, paragraph 318).
78
307. Further, a crossing to Lysekil would be mostly in open sea and, as a result, be
more exposed to adverse weather conditions. The longer crossing time and
rougher conditions would raise operating (including fuel) costs for a ferry
operator.
308. In addition, no area in the port of Lysekil appears to have been regulated for
ferry services during the period under examination. It is likely that the
construction of a harbour or the upgrading of any existing facilities would have
required at least one building permit, which in principle requires detailed
development plans.290 The process for acquiring such permits normally lasts
from between six months to two years, excluding any time for appeals.291 In
addition, an environmental permit and, possibly, a water judgment would have
been required, as was the case for Kålvik. Therefore, similar uncertainties
relating to public approvals as described above in relation to Kålvik also applied
in Lysekil.
309. Those factors presented significant obstacles to using Lysekil as a destination
harbour for new entry in the relevant market during the period under
examination.
310. Despite those obstacles, Larvik-Strømstadlinjen AS attempted to establish a
route to Lysekil, after the problems it faced in obtaining access to Strömstad
harbour.292 As already described (see Section 5.4.4 above), LarvikStrømstadlinjen AS faced considerable difficulties in securing harbour access in
Lysekil and its efforts to establish a route to Lysekil eventually failed.
311. In October 2001, after reaching an agreement with Larvik-Strømstadlinjen AS,
the Municipal Assembly of Lysekil decided to construct a new ferry landing on
Anderssons kaj in central Lysekil. However, that decision was overturned in
2002 by the Swedish environmental courts on procedural grounds, following a
complaint based, inter alia, on environmental grounds.293
312. The question regarding the location of a possible ferry line in Lysekil was
controversial in any event. Thus, an internal Color Line memorandum dated 24
February 2002 referred to the fact that many citizens were against placing a
terminal on Anderssons kaj.294 The debate in the Municipal Assembly that took
place before the decision was taken to construct a ferry landing on Anderssons
kaj also illustrates that the decision was controversial among local politicians.295
290
Event # 464581, Delphi opinion, p. 29.
291
Event # 464581, Delphi opinion, p. 31-32.
292
In that regard, the company changed its name to Larvik-Lysekillinjen.
293
See event # 553056, Color Line’s Reply to the SO, attachment 59 (decision of the environmental
court); event # 440698, article in Bohusläningen dated 30 December 2002, “Ingen färjetrafik från
Anderssons kaj”; and event # 440704, article in Østfoldsposten dated 1 October 2002, “Nye ferjeplaner
i Lysekil”.
294
Event # 370985, p. 99 (PAB 64, p. 3/7); and event # 371458, p. 181 (HZI 74, p. 3/7) (“mange av
byens borgere er imot at man etablerer en fergeterminal på Andresons kaj”).
295
Event # 553056, Color Line’s Reply to the SO, attachment 57.
79
313. Furthermore, it appears that significant investments were required, including in
infrastructure, before a ferry line to Lysekil could have been established. Color
Line states in its Reply to the SO that Larvik-Strømstadlinjen planned to invest
SEK 65-80 million, including a terminal on Anderssons kaj.296 Color Line’s
own assessment of Anderssons kaj at the time was that it was 100 years old and
weak. In a memorandum dated 12 March 2002, Color Line stated that since the
Municipality did not wish to tear down the existing buildings until it was certain
that if a new ferry line commenced operations in the harbour it would be there
for the long-term, such a line would have to make do with a temporary floating
ramp, a small lining-up area for cars, and barracks for a terminal in the initial
phase.297
314. It follows from the above that the public port of Lysekil cannot be regarded as
having offered genuine possibilities for new entry within a reasonable time
frame for a potential new entrant seeking to compete with Color Line on the
relevant market for passenger ferry services.
5.4.5.4.2 Color Line’s arguments regarding Lysekil
315. In its Reply to the SO, Color Line argues that there are several areas in Lysekil
harbour that could be used for ferry operations and that there were no regulatory
barriers or uncertainties in relation to obtaining harbour access in Lysekil. Color
Line claims that harbour access could have been obtained in about one year. It
also argues that establishment in Lysekil was possible with limited
investments/technical works in the harbours.298
316. However, as stated above, no area in the port of Lysekil was regulated for ferry
services during the period under examination and the evidence (referred to
above) shows that the location of a possible ferry line in Lysekil was
controversial.299 None of the areas to which Color Line refers (apart from
Anderssons kaj) appear to have been properly assessed by the Municipal
Assembly at the time. The newspaper articles which Color Line cites in support
of those alternatives are based simply on suggestions from citizens or political
figures, without any evidence that they had been properly assessed.
317. In the section dealing with Lysekil in its Reply to the SO, Color Line itself
refers to the uncertainty regarding public approvals/permits, stating that:
296
Event # 553056, Color Line’s Reply to the SO, paragraph 436. In a memorandum dated 26 October
2001, Color Line referred to a large quay that was to be built in the centre of Lysekil at a cost of NOK
65 million, of which the ferry company Larvik-Linjen AS was to pay NOK 55 million. The rest would
be recovered by the Municipality through harbour fees, event # 371458, p. 158 (HZI 69, 1/4).
297
Event # 370985, p. 98-99 (PAB 64, p. 2/7-3/7); and event # 371458, p. 180-181 (HZI 74, p. 2/73/7).
298
Event # 553056, Color Line’s Reply to the SO, sections 7.3.4.4 and 11.3.2.4.3.
299
Event # 370985, p. 97-98 (PAB 64, p. 2/7-3/7); event # 371458, p. 180-181 (HZI 74, p. 2/7-3/7);
and event # 553056, Color Line’s Reply to the SO, attachment 57.
80
“Regulatory circumstances, including in particular how long time it will take to
get the required permits in place, depend to a large degree on the political will
found in each individual municipality/county”.300
318. Furthermore, many of Color Line’s arguments do not sit well with its own
contemporaneous assessments of Lysekil. Thus, in 2001, Color Line found that
it would be difficult for a ferry service to Lysekil to compete with its Sandefjord
– Strömstad route with regard to comfort, availability, duration and cost. A
Color Line memorandum from October 2001 in relation to a potential route to
Lysekil is telling in that regard. Under the heading “competitive assessment” it
is stated that:
“The crossing between Sandefjord and Strömstad is around 38 nautical miles
and approximately the same is valid for Larvik and Strömstad. The crossing
between Larvik and Lysekil totals 66 nautical miles. Our captains calculate this
crossing to take around 4 hours compared to our 2 ½. The sea between Larvik
and Lysekil is very exposed to the weather. Our route is in sheltered waters
apart from ½ hour in the middle. The crossing Larvik – Lysekil will by and
large be in open sea without protection from islets and rocks.
If they start at 0700, they will at the earliest be able to finish the day at 2400.
This demands two crews per day. They will also have much larger fuel costs
than us per trip. There will probably only be ½ or 1 hour ashore before they
turn – which makes shopping on land for day trip guests more difficult. The
guests will have to stay 8 hours on board without cabins.
The road from Lysekil to E-6 has been improved lately, but is still long and
bendy.
All in all it seems quite difficult to compete with us concerning comfort,
availability and time. There is an element of danger that the passengers in the
start-up months June and July, who are going on holiday southwards in
Sweden, Denmark and Germany and eastwards, choose Larviklinjen. These
might find it convenient to take Larviklinjen. The distance Strömstad –
Gøteborg is covered in 1½ hours, so there is little to gain for a passenger with a
car.”301
300
301
Event # 371458, p. 159 (HZI 69 2/4), memorandum of 26 October 2001 (unofficial translation from
Norwegian by the Authority: “Konkurransemessig vurdering – Overfarten mellom Sandefjord og
Strømstad er 38 nautiske mil og omtrent det samme gjelder mellom Larvik og Strømstad. Overfarten
mellom Larvik og Lysekil er på hele 60 nautiske mil. Våre kapteiner beregner denne overfarten til å ta
bortimot 4-timer mot våre 2 1/2. Havområdet mellom Larvik og Lysekil er meget værutsatt. Vi går
innaskjærs hele tiden bortsett fra 1/2 time midt utpå. Overfarten Larvik- Lysekil vil stort sett foregå i
åpent hav uten beskyttelse av holmer og skjær. Dersom de starter kl 0700 vil de tidligst kunne avslutte
dagen kl 2400. Det betinger to crew pr. dag. De vil også få langt større fuelkostnader enn oss per legg.
Det vil sannsynligvis bare bli 1/2 eller 1 times landligge før de snur – hvilket vanskeliggjør handling
på land for dagsturgjester. Gjestene skal oppholde seg 8 timer om bord uten lugarer. Veien fra Lysekil
og opp til E-6 er utbedret siste tiden, men er likevel lang og svingete. Alt i alt synes det ganske
vanskelig å kunne konkurrere med oss hva gjelder behagelighet, tilgjengelighet og tid. Det synes
likevel å være et faremoment i at gjester i oppstartmånedene juni og juli skal på ferie sydover i Sverige,
81
319. Color Line refers at the end of this quote to passengers travelling to destinations
south of Lysekil and points out that Lysekil’s more southern location (compared
to Strömstad) would be an advantage for passengers travelling to destinations
south of Lysekil/the rest of Europe, and that the shorter distance to Gothenburg
is an advantage for Lysekil.302
320. As already stated, such passengers only formed a small segment of Color Line’s
customer base which were not a priority for Color Line and which would not
have been a priority for a potential new entrant in the relevant market.303
Moreover, the total travel time of taking a ferry from Larvik to Lysekil
(approximately 4h) and driving to Gothenburg (approximately 1h45) would be
approximately 5h45. That is in fact longer than the total travel time
(approximately 4h40) of taking the ferry from Sandefjord to Strömstad
(approximately 2h30) and driving to Gothenburg (approximately 2h10).304 In
that light, the southern location of Lysekil does not provide any significant
advantages for Lysekil as compared to Strömstad.
321. Color Line also argues that with a faster ferry, such as Color Line’s
“Superspeed”, travelling time to Lysekil could be reduced to three hours.305 This
would still be 30 minutes longer than Color Line’s crossing time. More
importantly, the costs of investing in such a high-speed ferry would be
significant and probably prohibitive. According to Color Line’s 2008 annual
report, the contract price for “Superspeed” was EUR 126.7 million, (over NOK
1 billion).306 In comparison, Color Line invested only approximately NOK 210
million (including upgrades) in its largest vessel on the Sandefjord – Strömstad
route, in 2000/01.307 Higher speed would also increase fuel costs, which would
already be high for a conventional ferry sailing to Lysekil compared to a
crossing from Larvik to Strömstad.308
Danmark, Tyskland og østover velger Larviklinjen. Disse kan finne det hensiktsmessig å ta
Larviklinjen. Strekningen Strømstad- Goteborg kjøres på 1 1/2 time, slik at det er lite å hente for en
gjest med bil”).
302
See also event # 553056, Color Line’s Reply to the SO, paragraph 773.
303
See Section 4.3 above.
304
The driving distance between Strömstad and Gothenburg is approximately 163 km or two hours and
10 minutes (Source: Google Maps). In the past, driving times may have been slightly longer due to
road improvements on the E6 motorway in recent years.
305
Event # 562106, slide 49; event # 553056, Color Line’s Reply to the SO, paragraph 439; Color Line
made the same point at the oral hearing.
306
Annual report 2008, page 9, http://www.colorline.se/polopoly_fs/1.2799!/aarsrapport_08.pdf.
307
308
Color Line also claimed at the oral hearing that a vessel which sailed at 22 knots, with a travelling
time of 3 hours and 15 minutes could be used, event # 562106, slide 49. That remains 45 minutes
longer than Color Line’s ferries and fuel costs would increase significantly. Moreover, it is unclear
what type of vessel this would require, since Color Line’s own vessels seem to be unable to operate at
this speed. According to Color Line’s web site, Color Viking has a service speed of 18 knots
(http://www.colorline.com/ships_and_sailings/stromstad__sandefjord/technical_facts_m_s_color_viking).
82
322. In the light of the above, Color Line’s arguments do not alter the Authority’s
assessment of Lysekil as a harbour alternative.
5.4.5.4.3 Conclusion on Lysekil
323. In conclusion, the Authority finds that Lysekil cannot be regarded as having
offered genuine possibilities for new entry within a reasonable time frame for a
potential new entrant seeking to compete with Color Line on the relevant
market for passenger ferry services during the period under examination.
5.4.5.5 Other harbours
324. Color Line argues that not only existing harbour facilities had the potential to
constitute a viable alternative to Torskholmen and states that “presumably
within this coastline there are areas that have been/may potentially be classified
for harbour purposes”.309 It argues that the fact that the building of a
quay/harbour in such an area would require regulatory permits is not something
that on a general basis can exclude a given area from the assessment and that all
facilities on the Swedish side that make it possible to enter the relevant market –
independently of whether this requires investments and regulatory clarification
– must be included in the competition analysis, even harbours up to and
including Gothenburg.310
325. The Authority cannot accept these arguments.
326. Firstly, Color Line has failed to identify any concrete alternative north of
Lysekil that has not been included in the Authority’s analysis above. The
Authority is not aware of any such alternatives. None of the respondents with
whom the Authority has been in contact during its investigation have indicated
any possible harbour alternatives for ferry operators on the Swedish coast north
of Lysekil other than those considered in detail above.
327. Secondly, the Authority notes that the entire coastline from the Norwegian
border to Lysekil is, in principle, an area of national interest for tourism and
outdoor recreation. That was the case throughout the period under examination.
Therefore, in unexploited areas, an exemption from the national interest would
have had to be granted before any construction could be undertaken. Rules
regarding the protection of the shoreline are also relevant: they provide that
within a belt of 100 metres from the shoreline the construction of buildings or
other structures that prevent public access is a priori prohibited. A special
exemption would therefore have been required in order to construct a quay in a
previously unspoiled area.311
328. In that light, and for the reasons already stated, even assuming that there were
other potential areas between Strömstad and Lysekil that were physically
309
310
311
Event # 464581, Delphi opinion.
83
suitable for harbour activities, exploitation of such areas with no quay/harbour
would have faced significant regulatory obstacles, most likely in addition to a
lack of the necessary inland infrastructure.
329. As regards any potential harbours south of Lysekil, given that a crossing to
Lysekil would have taken significantly longer than the route to Strömstad, as
explained above, such possibilities can be ruled out on the basis of travel time
alone.
5.4.5.6 Conclusion on harbour alternatives
330. In the light of the above, the Authority is of the view that the possible
alternatives to Torskholmen were limited: in all cases, significant uncertainties
existed in relation to permits, the duration of the application processes and the
likely success or otherwise of such applications. Uncertainties also existed in
relation to commercial and other factors. All of those uncertainties led to a lack
of predictability and stability for potential new entrants, a factor which was also
likely to have an impact on the possibilities of obtaining financing for a
potential new ferry operation.
331. The Authority notes that a potential new entrant in the relevant market during
the period under examination would have had to assess the risks in potential
alternative harbours ex ante. Color Line has consistently stressed its own need
for predictability in order to operate a ferry service and carry out economically
desirable investments. When defending its long-term exclusivity in its Reply to
the SO, Color Line argues that “[u]ndisturbed harbour access was again a
precondition for Color Line being able to exercise its planned activity and
consequently also a precondition for investments to be made”,312 and that its
exclusivity was necessary to ensure the predictability it required to build up a
route.313
332. By contrast, Color Line argues in its Reply that a new entrant could start
operations without even having the certainty that relevant permits would be
granted. Following Color Line’s arguments regarding its own operations, a new
entrant would not have been able to make the necessary investments or to plan
and expand its activities in such a state of uncertainty.
333. The Authority therefore concludes that during the period under examination
none of the possible alternatives to Torskholmen constituted genuine harbour
alternatives for new entry within a reasonable time frame for a potential new
entrant seeking to penetrate the relevant market for passenger ferry services and
compete with Color Line.
5.4.6
Capacity at Torskholmen
334. Color Line argues that circumstances other than harbour alternatives also show
that the harbour agreement did not have any foreclosure effects.
312
313
Event # 553056, Color Line’s Reply to the SO, paragraphs 15-25 and 532 et seq.
84
5.4.6.1 Color Line’s right of expansion argument
335. Color Line claims in its Reply to the SO that there must be a clear “right of
expansion” in the permit Color Line was granted for the use of Torskholmen;
that the question of whether there would be space for a second operator cannot
take as a point of departure Color Line’s existing exploitation of capacity at any
and all times and, finally; that assessment under the competition rules must
allow for natural expansion.314
336. Color Line argues further that the consequence of the Authority’s conclusions
concerning capacity expansions is that an operator is restricted to the quantity it
finds it responsible to operate in a start-up phase, without any possibility of
subsequent expansion. It considers that it is legitimate in a start-up phase to
reserve more capacity than initially used while customer volumes are built.315
337. However, Color Line has not explained why a right of expansion under a longterm exclusive agreement should be upheld under Article 53 EEA. In this
regard, it must be recalled that under the harbour agreement Color Line was
granted exclusive access to Torskholmen for 15 years with the right to renew
that period for a further 10 years. A central concern in the present case is that by
concluding the harbour agreement Color Line reserved to itself all capacity at
Torskholmen for up to 25 years to the exclusion of all potential entrants. It is
that very fact which allowed Color Line to maintain its monopoly position on
the relevant market until the end of 2005 and which, thereby, created anticompetitive foreclosure effects prohibited by Article 53(1) EEA.
338. Under those circumstances, a possible right of expansion would have to be
justified by Color Line under Article 53(3) EEA and would require an
explanation of why such a right was indispensible and proof that the long-term
exclusivity did not afford Color Line the possibility of eliminating competition
in respect of a substantial part of the products/services in question (see Section 6
below).
339. Allowing for “natural expansion” as argued by Color Line when this would lead
to the maintenance of a monopoly cannot be accepted under Article 53(1) EEA.
In the circumstances of the present case, Color Line’s “right of expansion
argument” cannot by any means take its long-term exclusive harbour agreement
outside the reach of Article 53(1) EEA.
340. Color Line’s argument that as a consequence of the Authority’s reasoning an
operator is restricted to the quantity it finds it responsible to operate in a start-up
phase is not convincing either. The absence of exclusivity would not prevent an
operator from gradually increasing its presence in the market, for example in
response to increases in demand. However, the operator would have to live with
the risk that available harbour capacity which was not used by that operator
could be allocated to a competitor and, as a result, that the first operator would
314
315
Event # 553056, Color Line’s Reply to the SO, paragraphs 852 and 859.
85
face competition in the future. It is that risk that Article 53(1) EEA is designed
to protect. At the very least, in the circumstances of the present case, the need to
remove that risk would require justification under Article 53(3) EEA before it
could be accepted.
341. The alleged legitimate need to reserve more capacity than initially used in a
start-up phase while customer volumes are built cannot, in any case, apply to a
period of 25 years.
342. Color Line’s arguments must therefore be rejected.
5.4.6.2 Color Line: there was no spare capacity for a new entrant
343. Color Line also argues that there was no spare capacity for a new entrant at
Torskholmen, and, therefore, that there was no room for potential new entrants
during the period under examination, irrespective of Color Line’s exclusivity. It
claims that it is highly unrealistic that a competing offer would have arisen out
of services offered from the same harbour facilities in the absence of the
exclusive harbour agreement. It refers in that context to the number of sailings
required to make profitable the investments in tonnage etc., and to the times of
day at which it is necessary to have departures in order to capture a sufficiently
large market.316
344. Color Line has pointed out that the capacity at Torskholmen is limited for a
number of reasons, including the fact that the environmental permit limits the
number of calls to 2700 per year; the lining-up area accommodates a maximum
of 220 cars; the traffic from the ferry landing to the E6 partly passes through
central parts of Strömstad, creating heavy traffic problems; and that there are
limited physical possibilities of developing Torskholmen and little political will
to do so.
345. These arguments seem to be based on the premise that during the whole period
that the exclusivity applied Color Line would have occupied the better part of
the capacity at Torskholmen so that only a limited part of the total capacity
would, in any case, have been available to a potential new entrant.317 That
premise thus assumes a skewed allocation of the available capacity in favour of
Color Line even in the absence of long-term exclusivity.
346. However, in an alternative situation with a non-exclusive agreement or with an
exclusive agreement of shorter duration, the Municipality of Strömstad would
have retained its freedom to grant other operators access to Torskholmen, at
least at more regular intervals than every 25 years. In such a scenario, Color
Line would not have had any right to expand its activities to the detriment of a
potential new entrant. Nor would it have had an inherent right to maintain for
the future all sailings it had operated in a previous period. Thus, such an
316
317
See, in particular, event # 553056, Color Line’s Reply to the SO, paragraph 858, where Color Line
argues that “since Torskholmen only has space enough to receive one ferry at a time, a potential
second operator would have to be granted access between Color Line’s departures”.
86
alternative situation would have provided a possibility for introducing
competition in the market, which was removed by Color Line’s exclusive
agreement.
347. The premise on which Color Line builds its argument cannot therefore be
accepted.
348. Moreover, the available evidence in the present case does not suggest that the
total capacity available at Torskholmen, in the absence of Color Line’s longterm exclusivity, was insufficient to enable new entrants viably to operate routes
to Norway from Torskholmen in competition with Color Line.
349. Firstly, during the period under examination, Color Line experienced a
substantial increase in demand.318 From 1994 to 1999, for example, the number
of passengers travelling on the route more than doubled from less than 600 000
to more than 1.2 million.319 Color Line’s activity on the route expanded
significantly over time both in terms of the number of sailings320 and in terms of
the size of vessels, number of passengers and cars per boat.321
350. This suggests that the capacity in the harbour was far from saturated when the
harbour agreement was entered into in 1991, when the long-term exclusivity
was obtained, or in 1994, when the EEA Agreement entered into force.
351. Secondly, Color Line had concrete plans to introduce a third ferry in Strömstad
in response to the threat of new entry by Larvik-Strømstadlinjen in 2001, even
after the capacity increases that Color Line had already introduced and in
particular after the introduction of Color Viking on the route.322
352. Thirdly, after expiry of the initial 15-year term of the harbour agreement in
December 2005, the Municipality of Strömstad granted Kystlink access to
Torskholmen, for up to three daily departures,323 in spite of Color Line’s use of
the harbour at that time (six sailings per day in peak season). Indeed, in a letter
to Color Line in December 2003, the Municipality, referring to Torskholmen,
stated that “there is space in the harbour”.324
318
319
Event # 553056, Color Line’s Reply to the SO, paragraph 156. It is also recalled that the increase in
demand during these years was largely the result of exogenous factors outside Color Line’s own
control (see Section 3.4.4 above).
320
321
322
See paragraphs 179-180 above; see also event # 556818, p. 298, attachment 86 to Color Line’s
Reply to the SO (letter from Color Line to Strömstad Municipality dated 24 April 2001 referring to the
frequency of calls (“turtetthet”) and the plans to introduce a third ship from Strömstad).
323
Event # 413438, p. 1 (harbour agreement between the Municipality of Strömstad and Kystlink). See
paragraphs 183 to 190 above.
324
Event # 407261, p. 12 (attachment 2 to reply from Strömstad Municipality dated 22 January 2007.
Unofficial translation from Swedish by the Authority: “och då plats finns i hamnen”).
87
353. While Color Line has claimed, on the basis of the situation in summer 2007,
that Kystlink’s service caused problems in relation to traffic jams, security, and
deterioration of Color Line’s service due to the fact that Kystlink’s customers
approached Color Line staff and used Color Line toilets,325 both Kystlink326 and
the Municipality of Strömstad have stated that there were no operational
problems resulting from the presence of two companies on the quay. The
Municipality of Strömstad has stated that:
“no major problems have occurred. The smaller problems we have faced have
been caused by co-ordination problems, not by the increased number of
departures as such.”327
354. Indeed, as Color Line itself points out, after an initial provisional two-year
period of access granted to Kystlink, on 17 June 2008 the Municipality of
Strömstad decided that Kystlink would be granted continued access to
Torskholmen.328 Thus, in the view of the Municipality, even in 2008, after two
years of competing activity, there was still sufficient capacity to allow that
activity to continue.329
355. Fourthly, Bastø-Fosen considered that the prospects of new entry on the route
were good at the end of the 1990s,330 and around the year 2000 LarvikStrømstadlinjen appeared willing to enter the market if it could obtain access to
Torskholmen.331 It appears that both Bastø-Fosen and Larvik-Strømstadlinjen
were planning to enter the market with a single vessel.332 Thus, there is no
indication that entry with only one vessel was regarded by potential new
entrants as not economically viable. It is recalled that Color Line enjoyed
significant earnings on the route.333
325
Event # 451440, reply from Color Line dated 6 November 2007. However, Color Line does not
explain why Kystlink’s one daily departure caused traffic jams “throughout the day” as it claims.
326
Event # 439592, reply from Kystlink dated 31 August 2007.
327
Event # 469954, reply from the Municipality of Strömstad dated 13 March 2008 (Unofficial
translation from Swedish by the Authority: “Några större problem har inte uppstått. De små problem
som uppstått har varit en följd av samordningssvårigheter, inte av det ökade antalet avgånger i sig.”).
328
See event # 553056, Color Line’s Reply to the SO, paragraph 882.
329
The Authority notes that there is no information available which suggests that Kystlink’s exit from
the market in 2008 was the result of limited capacity at Torskholmen.
330
See paragraphs 173-176 above.
331
See paragraphs 177-182 above.
332
See, as regards Bastø-Fosen, event # 410203 (page 2 of Bastø-Fosen’s internal presentation of
December 1999 shows that its net present value calculations was based on the premise that it would
enter the market with one ferry). There is no information available which suggests that LarvikStrømstadlinjen was considering entering the market with more than one ferry.
333
88
356. In addition, vessels used on sailings from Norway to Strömstad could also have
been used on routes to other destinations. For example, that possibility was used
by Kystlink.334
357. In conclusion, Color Line’s arguments relating to the extent to which there was
spare capacity at Torskholmen for a new entrant must be rejected.
5.4.6.3 Color Line: capacity constraints led the Municipality to reject applications
for harbour access
358. Color Line claims that it was circumstances relating to capacity constraints that
led the Municipality of Strömstad to reject applications for harbour access at
Torskholmen until Kystlink in December 2005, and not the exclusivity granted
to Color Line in the harbour agreement.335
359. In this regard, it is observed firstly that Color Line’s claim is closely related to
its argument that the Municipality did not feel bound by the exclusivity.336 The
latter argument is dealt with in more detail in Section 5.4.7 below, which shows
that the exclusivity was a significant complicating factor that the Municipality
had to take into account when considering whether to grant potential new
entrants access to Torskholmen.
360. Secondly, as regards the question of whether there was sufficient capacity at
Torskholmen to accommodate two competing ferry operators, reference is made
to the preceding Section 5.4.6.2.
361. Thirdly, as Color Line points out, in June 2001 the Environmental
Administration concluded, after an overall assessment and after hearing Color
Line and Larvik-Strømstadlinjen, that, given the circumstances at that time, colocation at Torskholmen would not be possible.337 However, that assessment
took Color Line’s existing use of Torskholmen in 2001 as a starting point and as
a given parameter. Further, it was noted that the exclusive harbour agreement
with Color Line was a factor of importance for the assessment. It also seems
that the introduction of a possible third Color Line vessel was factored into the
considerations,338 precisely, it seems, because Color Line had an exclusive right
to use Torskholmen. On the other hand, no weight seems to have been given to
the consideration that maintaining Color Line’s long-term exclusive agreement
might raise questions under competition law.
334
Kystlink sailed to Denmark during the night and Strömstad during the day with the same vessel.
335
336
See event # 553056, Color Line’s Reply to the SO, section 11.7.
337
Event # 556818, p. 296-305, attachment 86 to Color Line’s Reply to the SO; and event # 408737, p.
169-170, reply from Strömstad Municipality (analysis by the Environmental Administration dated 10
June 2001 addressed to the Environmental Committee).
338
Event # 556818, p. 304, attachment 86 to Color Line’s Reply to the SO, assessment by the
Environmental Administration indicating, on the basis of information submitted to it by Color Line,
that a Color Line route to Larvik might be introduced (“Color Line som idag trafikerar Sandefjord har
ochså deklarerat att en lijne til Larvik can be aktuell”).
89
362. Fourthly, as argued above, subsequent developments regarding Kystlink’s
application for access to Torskholmen showed, in spite of Color Line’s use of
the harbour at the time, that it was possible to let a new entrant have access to
Torskholmen. At that later stage, the Municipality gave more weight to
competition law concerns since Kystlink, when applying for harbour access in
November 2003, had argued that Color Line’s exclusive access to Torskholmen
was an infringement of competition law.
363. In conclusion, Color Line’s argument must be rejected.
5.4.6.4 The relevance of the Bronner case
364. Color Line argues that the consequence of the Authority’s arguments would be
that Color Line would have had to relinquish or reduce its presence in Strömstad
after a certain time in order to allow entry by other operators. It claims that that
could only follow if access were absolutely necessary for operating on the
relevant market; in such circumstances, the conditions laid down in the Bronner
case law would apply,339 which, according to Color Line, are not fulfilled in the
present case.340
365. However, in the present case, the question is not whether Color Line unilaterally
refused to supply to its (potential) competitors a service necessary in order to
develop a related market, which could be contrary to Article 54 EEA and,
therefore, justify the application of the “essential facilities doctrine”. This case
is one where the position that Color Line reserved itself, through its agreement
with the Municipality of Strömstad, was capable of giving rise to a restriction of
competition on the relevant market during the period under examination.341
366. In conclusion, Color Line’s Bronner argument is not relevant for the assessment
in the present case.
5.4.6.5 Conclusion on the capacity at Torskholmen
367. In the light of all the above, Color Line’s arguments relating to the limited
capacity at Torskholmen cannot be accepted.
368. The Authority notes in any event that, even if capacity had been saturated (quod
non), that would not necessarily have removed the harbour agreement from the
scope of Article 53(1) EEA due to the very lengthy duration of the exclusivity
granted under that agreement. Color Line’s unrestricted right to capacity for
such a long duration put it in a position that allowed it to exclude competition
on the relevant market during a significant period of time.
339
Case C-7/97 Oscar Bronner [1998] ECR 7791.
340
Event # 553056, Color Line’s Reply to the SO, paragraphs 835 and 623-624.
341
See, to that effect, Case T-419/03 Altstoff Recycling Austria AG v Commission, judgment of 22
March 2011, not yet reported, paragraphs 104-110.
90
5.4.7
The extent to which the Municipality of Strömstad considered itself bound
by the exclusivity
369. Color Line argues that the Municipality of Strömstad never felt bound by the
exclusivity in the harbour agreement and, therefore, that the agreement did not
have any restrictive effect on competition. According to Color Line, the
Municipality consistently acted as if it had a more wide-ranging right to let
other ferry companies access Torskholmen, giving positive signals to several
shipping companies, including Larvik-Strømstadlinjen, and granting access to
Kystlink in December 2005 in violation of the agreement. Color Line claims
that, to its knowledge, the harbour agreement has never been cited by the
Municipality as an impediment to granting access to Torskholmen, which
indicates that the exclusivity clause was not perceived by the Municipality as a
restriction of its freedom to grant access to competing ferry companies.342
370. Those arguments cannot be accepted.
5.4.7.1 The circular nature of Color Line’s argument
371. Color Line’s argument that the Municipality never felt bound by the exclusivity
is circular: Color Line does not dispute that there was a legally binding longterm agreement concluded between Color Line and the Municipality at the
outset which granted Color Line exclusive access to Torskholmen. Color Line
has further argued that that agreement was legally enforceable.343 It is obvious
that the agreement, if legally enforceable, limited the Municipality’s freedom to
grant other, competing ferry operators access to Torskholmen.
372. Moreover, the fact that one contracting party ultimately decides not to honour a
contract which is in violation of the EEA competition rules does not imply that
the other party escapes liability under Article 53 EEA.344
373. As regards Color Line’s claim that to its knowledge the harbour agreement has
never been cited by the Municipality as an impediment to granting access to
Torskholmen, it is noted that it is not a requirement under Article 53(1) EEA
that one party to a written agreement has expressed to the other party, or to third
parties, that the agreement in question is or has been an impediment to market
access.
374. For these reasons alone, Color Line’s argument must be rejected.
5.4.7.2 Color Line’s arguments lack support in the available facts
375. Color Line’s claim that the Municipality consistently acted as if it had a more
wide-ranging right to let other ferry companies access Torskholmen, in addition
342
343
As late as August 2008 Color Line maintained vis-à-vis the Municipality that the 1991 harbour
agreement still gave it an exclusive right to Torskholmen. See event # 553056, Color Line’s Reply to
the SO, paragraph 882.
344
See Case C-453/99 Courage v Crehan [2001] ECR I-6297.
91
to being a circular argument as explained above, also lacks support in the
available evidence.
376. First, Color Line asserts in this regard that the Municipality gave positive
signals to several shipping companies, including Larvik-Strømstadlinjen.
However, Color Line has not referred to any piece of evidence which supports
the assertion that the Municipality gave such signals with respect to the use of
Torskholmen in violation of the provisions of the 1991 harbour agreement.
377. Secondly, it appears from the evidence that the Municipality of Strömstad
actively attempted to have the harbour agreement with Color Line amended and,
in that regard, took initiative to remove the exclusivity and thereby make room
for a second operator. The 1991 harbour agreement stipulated that Color Line’s
special harbour fee rebate would come to an end in 2000 and that normal
harbour fees would apply thereafter. When Color Line commenced negotiations
with the Municipality of Strömstad in 2000 with a view to avoiding a substantial
rise in its harbour fees, the Municipality was prepared to enter into a new
agreement, subject to the exclusivity being removed.345
378. A draft agreement that would have entered into force on 1 January 2001 was
approved by the Municipal Assembly on 21 December 2000 in that regard.346
However, although the Municipality had understood that Color Line had
accepted the new agreement, Color Line pressed for amendments and required
that its exclusive access to Torskholmen be maintained.347 At the time, the
Municipality explained to a local newspaper that it would not “for yet another
period accept something which may be perceived as a monopoly for Color
Line”,348 and referred to the fact that the Municipality had to take EU
competition law into account.349
379. Nevertheless, the outcome of the negotiations with Color Line was that the 1991
harbour agreement, including the exclusivity, was maintained, but that Color
Line accepted to pay higher harbour fees.350
345
Event # 432050, p. 1 and 3 et seq, reply from Strömstad Municipality dated 29 July 2007.
346
Event # 401822, p. 57-60, reply from Color Line dated 4 December 2006, annex 9.
347
Event # 401822, p. 66 (e-mail from Strömstad Municipality to Color Line dated 8 March 2001
referring (inter alia) to Color Line’s request that paragraph 7 of the 1991 harbour agreement (the
exclusivity clause) be transferred to the new agreement and responding that politically that would not
be possible, and stating that it was very regrettable that such important issues in relation to the
agreement were raised in “added time”, and asking whether Color Line intended to sign the agreement
which “everybody thought had been accepted by the company”); event # 432050, reply from Strömstad
Municipality dated 29 July 2007, p.1 (reply to question 2) and p. 17-18 (correspondence between the
Municipality and Color Line).
348
Event # 401822, p. 70, reply from Color Line dated 4 December 2006, annex 9 (Strömstad Tidning
Tuesday 20 March 2001, unofficial translation from Swedish by the Authority: “Kommunen vill inte för
en ny period gå med på något som kan tydas som ett monopol för Color Line.”).
349
Event # 401822, p. 71.
350
Those fees were considerably higher than the harbour fees it had paid previously. Color Line states
that it paid between NOK 11.9 and 15.2 million in harbour fees annually from 2001. From 1996 to
92
380. While the Municipality’s efforts to remove the exclusivity at this stage failed,
Color Line’s claim that the Municipality consistently acted as if it had a more
wide-ranging right to let other ferry companies access Torskholmen is not
supported by this turn of events.
381. Thirdly, the Environmental Administration of the Municipality of Strömstad
assessed in a memorandum to the Environmental Board, dated 10 June 2001,
whether it would be possible to have more ferry operators at Torskholmen. In
that regard, mention was made of the harbour agreement with Color Line as a
factor of importance for the assessment.351
382. Fourthly, in finding in 2001 that neither Bastø-Fosen nor LarvikStrømstadlinjen could have obtained access to Torskholmen, in spite of the fact
that at least the latter company had actively attempted to obtain such access, the
City Court of Oslo referred to Color Line’s exclusive agreement as a factor of
relevance in that regard.352
383. Thus, prior to granting Kystlink’s application for harbour access at
Torskholmen in December 2005, the Authority cannot see how the available
evidence supports Color Line’s claim that the Municipality acted as if it had a
right to grant other ferry companies access to Torskholmen.
5.4.7.3 Color Line actively invoked its exclusivity with a view to preventing
Kystlink from obtaining access to Torskholmen and entering the relevant
market
384. It is recalled that when Kystlink applied for harbour access in Strömstad Color
Line vigorously defended its long-term exclusive agreement before the
Municipality, seeking to maintain its exclusivity and thereby prevent Kystlink
from entering the market (see paragraphs 186-187 above). Events around that
period show that the Municipality respected its agreement with Color Line until
it determined, towards the end of 2005, that the exclusivity provisions infringed
the competition rules.
385. When Kystlink applied for harbour access in November 2003, it maintained that
Color Line’s exclusive access to Torskholmen was contrary to competition
law.353 This led the Environmental Administration of the Municipality of
Strömstad to write to Color Line on 4 December 2003, after receiving
Kystlink’s application for access to Torksholmen, informing Color Line that:
2000 it paid around NOK 1.6 million (annex 10.2 to Color Line’s reply of 4 December 2006, event #
401815).
351
Event # 556818, p. 304, attachment 86 to Color Line’s Reply to the SO; and event # 408737, p. 169170, reply from Strömstad Municipality (analysis by the Environmental Administration dated 10 June
2001 addressed to the Environmental Board).
352
Event # 410205, p. 42-43 of the judgment (“Etter avtalens pkt. 7 har kommunen ikke rett til å
bestemme at ilandkjøringsanlegg for biler og biloppstillingsplasser skal benyttes av konkurrerende
fergevirksomhet”).
353
Event # 407261, p. 12 (attachment 2 to reply from Strömstad Municipality dated 22 January 2007).
93
“As the Municipality understands, [Kystlink] claims that this provision
[paragraph 7 of the Arrendeavtal] is contrary to competition law. [Kystlink]
has submitted a memorandum with extracts from the Swedish Competition Act
and its preparatory works regarding Articles 6, 7, concerning prohibited
restrictions of competition and 19, concerning abuse of a dominant position.
The Municipality’s preliminary assessment is that the provision in the
Arrendeavtal constitutes a restriction of competition and is invalid. In such a
case and as there is space in the harbour [Kystlink] can despite the
Arrendeavtal not be denied the right to call at the harbour and to use the quay
and the ramp.”354
386. In a letter dated 9 January 2004, Color Line replied to the Municipality,
referring to the 1991 agreement and maintaining its exclusivity. It claimed that:
“The agreement is binding on the Municipality until ordinary expiration,
possibly until it has been ultimately determined that the agreement is invalid
because it is contrary to the law.”355
387. In its letter, Color Line submitted a number of arguments pertaining to Swedish
and EU competition law, together with a legal opinion in support of its
position.356 Color Line concluded that it would be consistent with applicable EU
law if the Municipality acted in accordance with the 1991 agreement and
dismissed Kystlink’s application for harbour access.357
388. On 4 February 2004, the Municipality obtained its own legal opinion, which
disagreed with Color Line’s arguments and legal opinion, concluding that:
“The municipality cannot for these reasons refuse [Kystlink] access to the quay
and the ramp in the harbour. In case of refusal, the Municipality would risk
being sued by [Kystlink] before the competition authorities, the imposition of
fines and damages. We consider that a possible suit by Color Line against the
354
Event # 407261, p. 12 (attachment 2 to reply from Strömstad Municipality dated 22 January 2007 –
Kystlink is referred to as “UL” by the Municipality, a reference to RAUL, which was acquired by
Kystlink in 2004-2005 (see paragraph 7 above). Unofficial translation from Swedish by the Authority:
“Som kommunen förstår påstår UL att denne bestämmelse [p. 7] är i strid med konkurrensrätten. UL
har ingett ett PM med utdrag av den svenska konkurranslagen och dess förarbeten avseende
paragraferna 6, 7 avseende förbjudna konkurransbegränsningar och 19 avseende missbruk av
dominerande ställning. Kommunens preliminära bedömning är att betstämmelsen i arendeavtalet utgör
en konkurrensbegränsning och därmed är ogiltig. Vid sådant förhållande och då plats finns i hamnen
kan UL trots arrendeavtalet inte nekas rätt att anlöpa hamnen och använda kaj och ramp. ”).
355
Event # 407261, p. 16-36 (attachment 2 to reply from Strömstad Municipality dated 22 January
2007, unofficial translation by the Authority from Norwegian: “Avtalen er bindende for kommunen
frem til ordinært utløp, eventuelt frem til det er endelig fastsatt at avtalen er ugyldig fordi den strider
med lov.”).
356
2007, p. 21 of Color Line’s letter).
357
94
Municipality for breach of contract and damages would, under these
circumstances, be unsuccessful.”358
389. In a letter to the Municipality dated 12 March 2004, Color Line maintained its
exclusive rights under the 1991 agreement.359 Notwithstanding Color Line’s
stance, on 16 March 2004, after having received comments from its own legal
expert to Color Line’s latest submission,360 the Municipal Technical Board
decided that:
“There cannot be regarded to exist any legal impediment to allowing other
shipping companies to have access to the ferry berth at Torskholmen.”361
390. In a letter dated 16 April 2004 to the Municipality, Color Line claimed that the
decision of the Technical Board was wrong. It maintained that a municipal
decision could not change the content of an agreement that had been entered
into, that the question should be resolved by an independent body, in principle a
court, and that the decision of 16 March 2004 by the Technical Board could not,
in Color Line’s view, be regarded as more than a non-binding expression as to
how the agreement was to be understood when assessed in the light of the
applicable law.362 Color Line also stated that:
“We assume that Strömstad Municipality at a later stage […] will decide on the
question whether [Kystlink] will be allowed to call at Torskholmen. This
possible decision will, as we understand, imply something completely new and
different compared to the decision that was adopted on 16 March 2004. Color
Line retains its right to seek full legal review of such a new possible decision as
soon as it is available.”363
358
2007, unofficial translation by the Authority from Swedish: “Kommunen kan av dessa skäl inte vägra
att ge [Kystlink] tillträde till kaj och ramp i hamnen. En vägran skulle riskera en talan av [Kystlink]
mot kommunen hos konkurrensmyndigheterna, utdömande av böter liksom skadestånd. En ev. talan av
Color Line mot kommunen för kontraktsbrott och skadestånd skulle vi under dessa förhållanden inte
bedöma som framgångsrik.”).
359
2007).
360
2007).
361
Event # 407261, p. 69 (attachment 2 to reply from Strömstad Municipality dated 22 January 2007,
unofficial translation from Swedish by the Authority: “Att det ej kan anses föreligga något juridiskt
hinder att låta andra rederier anlöpa färjeläget på Torskholmen.”).
362
363
Event # 407261, p. 69 (attachment 2 to reply from Strömstad Municipality dated 22 January 2007 –
Kystlink is referred to as “RABUL” by Color Line, a reference to RAUL, which was acquired by
Kystlink in 2004-2005 (see paragraph 7 above). Unofficial translation from Norwegian by the
Authority: “Vi antar at Strømstad commune på et senere tidspunkt […] vil ta stilling til spørsmålet om
RABUL tillates å anløpe Torskholmen. Dette eventuelle vedtak vil etter det vi kan forstå innebære noe
helt nytt og annet i forhold til det vedtak som ble fattet 16. mars 2004. Color Line forbeholder seg
retten til å søke en full rettslig overprøving av dette nye eventuelle vedtaket så snart det foreligger.”).
95
391. During the process of designating a lining-up area for cars for the use of
Kystlink, Color Line wrote to the Municipality on 18 May 2004,364 referring to
such designation as a first step towards:
“a conscious and planned breach of contract on the part of the Municipality.”365
392. It stated further that:
“Strömstad Municipality has in its agreement with Color Line undertaken to
refrain from allowing competing ferry activity at Torskholmen. The agreement
is still in force. Color Line will act in accordance with the agreement unless and
until a court has confirmed that it is not compatible with the law.”366
393. Minutes from a meeting of the Municipal Technical Board on 5 October 2004
stated that:
“Work is ongoing in order to establish, together with judicial expertise, the
consequences of the existing agreement with Color Line in relation to the legal
conclusions which have been stated previously regarding the deviation from
applicable legislation.”367
394. In minutes from a meeting of the Municipal Technical Board on 14 December
2004 it was stated that:
“The legal status regarding the existing agreement with Color Line is subject to
further assessment.”368
395. In a letter to the Municipality on 18 July 2005, Color Line requested a 10-year
extension of the 1991 harbour agreement on the basis of its rights under that
agreement.369
364
2007).
365
unofficial translation by the Authority from Norwegian: “Som første skritt på veien mot et bevisst og
planlagt kontraktsbrudd fra kommunens side.”).
366
unofficial translation by the Authority from Norwegian: “Strømstad kommune har i sin avtale med
Color Line forpliktet seg til å avstå fra å tillate konkurrerende fergevirksomhet fra Torskholmen.
Avtalen løper fortsatt. Color Line forholder seg til avtalen helt til det eventuelt endelig er fastslått av
en domstol at den ikke er forenlig med lovgivningen.”).
367
unofficial translation by the Authority from Swedish: “Arbete pågår att tillsammans med juridisk
kompetans utröna konsekvenserna av befintligt avtal med Color Line i förhållande till de juridiska
slutsatser som angivits tidligare angående diskrepansen i förhållande till gällande lagstiftning.”).
368
unofficial translation by the Authority from Swedish: “Rättsläget avseende befintligt avtal med Color
Line utreds vidare.”).
369
96
396. On 2 December 2005, the Municipal Technical Board informed Color Line that
the harbour agreement needed to be adjusted in respect of the exclusivity clause
because it considered that that clause infringed Article 81 EC (now Article 101
TFEU).370
397. On 12 December 2005, Color Line sent two letters to the Municipal Technical
Board. The first letter, which concerned Kystlink’s application for harbour
access and Color Line’s exclusive right to operate ferry services at
Torskholmen, stated that:
“The Municipality takes on a considerable responsibility if it adopts a decision
which is in breach of the agreements entered into and which is not necessary in
relation to EU Law. Color Line will if necessary protect its interests”.371
398. The second letter concerned Color Line’s request for renewal of the 1991
harbour agreement. Referring to its right to extend the agreement for a further
10-year period, Color Line maintained that the extension had already been
granted since the Municipality had confirmed receipt of Color Line’s written
request for an extension. It also stated that:
“The draft contract that the Municipality has sent to Color Line contains on
some points significant deviations from the existing contract. The most
significant [point] is that Color Line’s exclusive right to operate ferry services
at Torksholmen is removed. The Municipality knows that Color Line cannot
accept this amendment. The Municipality’s draft is based on an understanding
of the law which Color Line disagrees with.”372
399. On 19 December 2005, Color Line’s lawyers informed the Municipality that if it
did not confirm that the 1991 harbour agreement was still applicable Color Line
would sue the Municipality in order to have that established. With regard to
Kystlink’s application for access to Torskholmen, the Municipality was
informed that Color Line would take legal measures in the event of a breach of
contract, including claiming damages.373
400. On 21 December 2005, just prior to expiry of the initial 15-year term of the
1991 agreement, the Municipal Assembly of Strömstad decided to grant
Kystlink’s application for access to Torskholmen for a two-year trial period (see
370
371
2007, unofficial translation by the Authority from Norwegian: “Kommunen påtar seg et betydelig
ansvar hvis den fatter et vedtak som bryter med inngåtte avtaler og ikke er nødvendig i forhold til EUretten. Color Line vil om nødvendig beskytte sine interesser.”).
372
2007, unofficial translation by the Authority from Norwegian: “Utkastet til kontrakt som kommunen
har oversendt til Color Line inneholder på enkelte punkter vesentlige avvik fra gjeldende kontrakt. Det
mest vesentlige er at Color Lines eksklusive rett til å drive fergevirksomhet på Torskholmen er tatt
vekk. Kommunen vet at Color Line ikke kan akseptere denne endringen. Kommunens utkast til kontrakt
baserer seg på en lovforståelse som Color Line er uenig i.”).
373
97
paragraph 47).374 Reference was made to the examination that had been made of
EU competition law. One premise for the decision was that the Municipality
could not prevent competitive activity, and that access to Torskholmen had to be
given to other operators if space was available.375
401. Consequently, when Kystlink applied for harbour access in November 2003,
Color Line’s exclusivity enabled it to put the Municipality under considerable
pressure with a view to preventing Kystlink from entering the market. The
exclusivity was therefore a significant complicating factor that the Municipality
had to, and did, take into account when considering whether to grant potential
new entrants access to Torskholmen. In the absence of the exclusive harbour
agreement it would have been easier for a potential new entrant to gain access to
Torskholmen. The exclusivity was therefore an impediment to new entry at least
until the decision of the Municipal Assembly on 21 December 2005 granting
Kystlink’s application.376
5.4.7.4 Conclusion
402. In the light of all the above, Color Line’s arguments to the effect that the
exclusive harbour agreement did not have any restrictive effects on competition
because the Municipality never felt bound by the exclusivity must be dismissed.
5.4.8
The tax-free regime prior to 1 June 2002
403. In Section 11.4 of the Reply to the SO, Color Line maintains, with reference to
the Suiker Unie and Daimler Chrysler cases,377 that it is settled case law that
where a market is regulated in such a way that competition is excluded,
agreements or concerted practices which could have had restrictive effects, do
not fall within the scope of Article 53 EEA. The reason is, according to Color
Line, that no causal relationship can be established between the conduct of
private parties and the absence of competition.
404. Color Line claims that the Norwegian authorities rejected all applications for
tax-free licences other than Color Line’s application until 1 June 2002, and that
this amounted to a “practice” that represented an absolute barrier to entry prior
to that date, irrespective of Color Line’s long-term exclusivity. It also claims
that the Swedish authorities rejected all applications for tax-free licences prior
to 1 June 2002.
374
375
2007).
376
The Authority notes that if the Municipality had succumbed to Color Line’s pressure in relation to
Kystlink’s application, Color Line would successfully have prevented new entry to the market. The fact
that Color Line’s efforts in that regard were unsuccessful does not in any way exonerate Color Line
from liability under Article 53 EEA.
377
Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114-73 Suiker Unie and others v Commission
[1975] ECR 1663; Case T-325/01 DaimlerChrysler v Commission [2005] ECR II-3319.
98
405. Thus, according to Color Line, even without the harbour agreement, new entry
on the relevant market would have been impossible before 1 June 2002, when
the tax-free regulations were changed; therefore, in Color Line’s view, the
harbour agreement could not have had any restrictive effects on competition in
the relevant market contrary to Article 53(1) EEA.378
406. The tax-free regime and the approach of the Norwegian authorities in respect of
applications for tax-free licences are discussed in detail in Section 3.6 above.379
The tax-free regime was recognised as a barrier to entry in Section 5.4.3 above.
407. However, the Authority cannot agree with Color Line’s arguments.
408. According to settled case law, an agreement or conduct which restricts
competition and which normally would be caught by Article 53(1) EEA can, in
exceptional circumstances, nevertheless fall outside the scope of Article 53(1).
409. That case-law was recently summarised by the ECJ in Deutsche Telekom:
“According to the case-law of the Court of Justice, it is only if anti-competitive
conduct is required of undertakings by national legislation, or if the latter
creates a legal framework which itself eliminates any possibility of competitive
activity on their part, that Articles [101 TFEU] and [102 TFEU] do not apply.
In such a situation, the restriction of competition is not attributable, as those
provisions implicitly require, to the autonomous conduct of the undertakings.
Articles [101 TFEU] and [102 TFEU] may apply, however, if it is found that
the national legislation leaves open the possibility of competition which may be
prevented, restricted or distorted by the autonomous conduct of undertakings…
The possibility of excluding anti-competitive conduct from the scope of Articles
[101 TFEU] and [102 TFEU] on the ground that it has been required of the
undertakings in question by existing national legislation or that the legislation
has precluded all scope for any competitive conduct on their part has thus been
accepted only to a limited extent by the Court of Justice...
Thus, the Court has held that if a national law merely encourages or makes it
easier for undertakings to engage in autonomous anti-competitive conduct,
those undertakings remain subject to Articles [101 TFEU] and [102
TFEU]…”.380
410. It follows from this case-law, firstly, that Article 53 does not apply if national
legislation requires undertakings to act anti-competitively. Secondly, it follows
378
379
Event # 553056, Color Line’s Reply to the SO, paragraphs 261-301. In its Reply, Color Line
provides an extensive overview of the tax-free regulations and the alleged “practice” of the Norwegian
authorities in that regard. In a position paper dated 6 May 2011, submitted to the Authority prior to a
meeting with the Authority on 11 May 2011, Color Line essentially repeats its main arguments in
relation to the tax-free regime.
380
Case C-280/08 P Deutsche Telekom v Commission, judgment of 14 October 2010 (not yet
published), paragraphs 80-82.
99
that Article 53 does not apply if national law creates a legal framework which
eliminates any possibility of competitive activity on the part of the undertakings
in question.
411. Conversely, Article 53 remains applicable if it is found that the national
legislation at issue does not preclude undertakings from engaging in
autonomous anti-competitive conduct, but merely facilitates or encourages such
conduct. Consequently, if national law merely encourages or makes it easier for
an undertaking to engage in autonomous anti-competitive conduct, the
undertaking remains subject to the EEA competition rules and may incur
penalties for infringing those rules.381
412. The Authority notes that the possibility of excluding specific anti-competitive
conduct from the scope of Article 101(1) TFEU or Article 53(1) EEA on the
grounds described above has been applied restrictively by the European
Courts.382 The scope of application of this “state compulsion” doctrine, as it is
often referred to, has been characterised as an “exclusion” which is extremely
narrow.383
413. When applying this case law, the Courts have emphasised the extent to which
the anti-competitive conduct is the result of the autonomous conduct of the
undertakings in question, or, put differently, whether the anti-competitive
conduct is engaged in “on their own initiative”.384 Consequently, in Deutsche
Telekom the question was whether the appellant had “scope to avoid” the anticompetitive margin squeeze at issue in that case, and, in particular, whether the
German legal framework during the period at issue removed any possibility of
competitive conduct by the appellant or whether it gave the appellant sufficient
scope to set its prices at a level which would have enabled it to end or reduce
the margin squeeze identified by the Commission.385
414. It is undisputed that the national legislation in place prior to June 2002 at issue
in this case did not require Color Line to enter into a long-term exclusive
harbour agreement. The question is therefore whether the national legislation in
place prior to June 2002 created a legal framework which eliminated any
possibility of competitive activity such that the restriction of competition
established in this Decision would not be attributable to Color Line.
381
Case C-198/01 Consorzio Industrie Faimmifieri [2003] ECR I-8055, paragraphs 56-57.
382
Joined Cases 209/78 to 215/78 and 218/78 Van Landewyck and Others v Commission [1980] ECR
3125, paragraphs 130 and 133; Joined Cases 240/82, 241/82, 242/82, 261/82, 262/82, 268/82 and
269/82 Stichting Sigarettenindustrie and Others v Commission [1985] ECR 3831, paragraphs 27 to 29;
and Case T-387/94 Asia Motor France and Others v Commission [1996] ECR II-961, paragraphs 60
and 65.
383
See, for example, Faull & Nikpay, The EC Law of Competition, second edition, p. 217 (Oxford
2007).
384
Joined Cases C-359/95 P and C-379/95 P Commisson and France v Ladbroke Racing [1997] ECR I6265, paragraph 33.
385
Case C-280/08 P Deutsche Telekom v Commission, judgment of 14 October 2010 (not yet
published), paragraphs 56, 84-89.
100
415. The legal framework at issue did not in any way limit Color Line’s freedom to
act in concluding and maintaining its long-term harbour agreement with the
Municipality of Strömstad entered into in 1991. That legal framework did not
therefore preclude all scope for competitive activity on the part of Color Line.
416. As in Deutsche Telekom, therefore, Color Line had sufficient “scope to avoid”
the anti-competitive conduct in question. For these reasons, the Authority is of
the view that Article 53 EEA applies to the anti-competitive conduct at issue in
the present case.
417. Even if the case law cited by Color Line could be applied to a situation where
the legal framework as such is unrelated to the anti-competitive conduct on the
part of the undertaking concerned, the Authority considers that the Norwegian
tax-free legislation did not create a legal framework which itself eliminated any
possibility of competitive activity on the relevant market.
418. The Authority is of the view that even if both harbour access and a tax-free
licence for long routes were necessary in order to enter the relevant market, the
Norwegian tax-free regime left open “the possibility of competition”: it did not
in any way prevent the Norwegian authorities from issuing licences to
applicants other than Color Line. The Norwegian authorities had a margin of
appreciation and were required to examine each application on its merits before
reaching a decision. Indeed, as Color Line points out in its Reply to the SO
(paragraphs 290-291), it had itself to apply for an extension of its tax-free
licence every year from the end of 1992 to the end of 1998: the Norwegian
authorities could have denied Color Line an extension and granted a similar
licence to another operator. Thus, it could not be known with any certainty in
advance how an individual application would be treated.
419. The conduct of the Norwegian authorities, which Color Line describes as an
administrative “practice”, can only be described in such a way with hindsight. It
could not be known during the period under examination whether, and if so for
how long, such an approach would be maintained: even if there had been a
series of negative findings in the past, it was always possible for the authorities
to take a different position in respect of a given application. Thus, there was
uncertainty as to the outcome of future applications for a tax-free licence
throughout the relevant period. Indeed, applicants such as Bastø-Fosen are
unlikely to have applied for a licence if it had been certain that their applications
would be rejected.
420. In that regard, Color Line’s conduct in relation to the threat of new entry on the
relevant market, described in detail in Sections 5.4.3 and 5.4.4 above, illustrates
the length to which Color Line was willing to go in order to protect its market
position and demonstrates that the applicable legal framework did not “preclude
all scope for any competitive conduct”. Color Line was not granted a legal
monopoly to operate on the relevant market. On the contrary, it faced a
competitive threat from potential new entrants and had an interest in
101
maintaining its exclusive access to Torskholmen so as to foreclose the relevant
market in order to fend off that competitive threat.386
421. Color Line enclosed with its Reply to the SO a letter from Bastø-Fosen to the
Norwegian Ministry of Finance dated 22 March 1999,387 claiming that that letter
shows that Bastø-Fosen regarded the Ministry’s “practice” as an absolute barrier
to entry.388 However, the letter is an appeal against the Ministry’s decision not
to grant Bastø-Fosen a tax-free licence. Therefore, it does not concern the
effects of a general practice but the effects of the specific decision addressed to
Bastø-Fosen, which was binding upon that company.
422. Indeed, Bastø-Fosen argues in the letter that:
“[B]ased on the earlier exemptions granted to Scandi-Line, Bastø-Fosen had, in
our opinion, a legitimate expectation that the application be subject to
equivalent treatment as Scandi-Line’s earlier applications, which would entail
that, as a consequence of earlier practice, it be granted a ‘long route status’
and the application would appear to be a mere formality”.389
423. Consequently, contrary to what Color Line claims, the negative decisions
adopted by the Ministry in respect of applicants other than Color Line were not
perceived either by Color Line itself or by market players at the time as
amounting to a “practice” constituting an absolute barrier to entry.
424. Thus, while it may be true that during the period prior to June 2002 for as long
as no other undertaking was granted a similar tax-free licence to that obtained
by Color Line it was in an advantageous situation and was protected against
effective competition, Color Line never knew how long the beneficial treatment
it had been given would be maintained. The risk that a new entrant would be
granted a tax-free licence that would enable it to enter the relevant market,
provided harbour access could be obtained, was always present. New entry was
therefore a potential threat to Color Line throughout the relevant period. Color
Line therefore had a clear incentive to protect its market position against that
threat.
425. It also follows that the potential competitive pressure on Color Line would have
been greater in the absence of its long-term exclusivity in Torskholmen, because
the likelihood of potential new entry would have been greater.
386
The Authority notes that it was stated explicitly in the 1991 harbour agreement that Torskholmen
should not be made available to “competing ferry activities”. This shows that Color Line was
concerned about the competitive threat from the outset.
387
Event # 556818, annex 76 to Color Line’s Reply to the SO.
388
389
Event # 556818, annex 76 to Color Line’s Reply to the SO (unofficial translation from Norwegian
by the Authority: “På bakgrunn av ScandiLines tidligere innvilgelser, hadde Bastø Fosen etter vår
mening en berettiget forventning om at søknaden ble undergitt tilsvarende behandling som Scandi
Lines tidligere søknader, her under at ruten som en konsekvens av tidligere praksis var klassifisert som
lang rute, slik at søknaden i realiteten kun fremstod som en formalitet.”).
102
426. In addition, it was always possible for an applicant to challenge a negative
decision by the Norwegian authorities before the courts, as Bastø-Fosen did
successfully in 2001. If an applicant had secured viable harbour access it would
have had increased incentives to challenge before the courts a refusal to grant a
tax-free licence, in particular in view of the fact that damages would in principle
have been available.
427. The arguments set out above apply equally to Color Line’s submissions in
relation to the rejection by the Swedish authorities of applications for tax-free
licences prior to June 2002.390 In addition, as described in Section 3.6.2.1 above,
the tax-free regulations are founded on a treaty between Norway and Sweden
(and Denmark and Finland). The content of the Norwegian and Swedish taxfree regulations as regards tax-free licences were therefore essentially the same,
and changes in the regulations were normally made at the same time, and as a
result of cooperation between the two countries.391
428. In the light of the above, despite the existence of the applicable tax-free regime
and the way in which it was administered, Color Line had a genuine interest in
protecting itself against potential new entry by securing long-term exclusive
access to the only public harbour in Strömstad. The foreclosure effect that Color
Line’s long-term exclusivity gave rise to therefore restricted competition within
the meaning of Article 53(1) EEA also prior to June 2002.
429. It follows that Color Line cannot rely on the case law relating to the
attributability of competition law infringements, referred to above, in order to
escape liability under the EEA competition rules in respect of the anticompetitive long-term harbour agreement at issue.
430. In the light of all the above, Color Line’s arguments relating to the applicable
tax-free regime prior to 1 June 2002 must be rejected.
5.4.9
Counter-factual
431. Color Line argues that the Authority did not, in its SO, substantiate any
alternative competition scenario without the long-term exclusivity, as required
by the case law. It argues that a concrete assessment must be made of how
market conditions would have developed without the long-term exclusivity. It
claims that the Authority failed in its SO to perform any counterfactual analysis
and that its statements regarding the alternative scenario were limited to mere
claims to the effect that the harbour agreement had a foreclosing effect because
de facto there was limited entry on the market, and that this was due to the
390
Event # 553056, Color Line’s Reply to the SO, paragraph 302, and event # 556768, attachment 37.
Color Line refers to only three decisions of the Swedish authorities. In two of those decisions, it is
stated that the application was decided after consultation with the Norwegian authorities. Thus, if the
Norwegian position had been different, it seems likely that the Swedish authorities would have
followed suit, in particular in view of the fact that the traffic on the route was mainly from Norway to
Sweden, and, therefore, the potential loss of tax revenues due to increased tax-free sales and border
trade much greater for Norway than for the Sweden.
391
Indeed, this is clear from Color Line’s description of the tax-free regime in both countries in its
Reply to the SO, event # 553056, paragraphs 261-301.
103
harbour agreement. In Color Line’s view, the Authority’s assessment does not
allow for other causes/barriers in the market that have led to there being no new
entry on the relevant market.392
432. Those arguments cannot be accepted. As regards the requirement for a counterfactual, in the recent O2 case the European Court of First Instance held that:
“…the effects of the agreement should be considered and for it to be caught by
the prohibition it is necessary to find that those factors are present which show
that competition has in fact been prevented or restricted or distorted to an
appreciable extent. The competition in question must be understood within the
actual context in which it would occur in the absence of the agreement in
dispute; the interference with competition may in particular be doubted if the
agreement seems really necessary for the penetration of a new area by an
undertaking...
The examination required in the light of Article [101(1) TFEU] consists
essentially in taking account of the impact of the agreement on existing and
potential competition (see, to that effect, Case C-234/89 Delimitis [1991] ECR
I-935, paragraph 21) and the competition situation in the absence of the
agreement (Société minière et technique at 249-250), those two factors being
intrinsically linked”.393
433. First, the Authority notes that in the present case, unlike in O2, it has not been
established (or argued) that the long-term exclusivity entered into by Color Line
allowed entry into the market of a competing undertaking. On the contrary, the
effect of the exclusivity was to foreclose potential competitors from the relevant
market.394
434. In any event, the Authority has, in this Decision (and in the SO), carried out a
thorough analysis of the effects of the conduct at issue and concluded that
potential competition has been prevented. In the Authority’s view, in the light of
the characteristics of the market in question, the entry of a new player would
have created scope for further competition in a market distinguished by an
extremely high degree of concentration – that is, by monopoly.395
435. Indeed, in the SO the Authority referred to the impact of Kystlink’s entry into
the market in 2006. While Kystlink commenced operations with only one daily
sailing (although it was permitted to operate up to three daily sailings), for
consumers Kystlink’s entry nevertheless meant an increase in the number of
392
Event # 553056, Color Line’s Reply to the SO, section 11.2.1. In its position paper dated 6 May
2011, submitted to the Authority prior to a meeting with the Authority on 11 May 2011, Color Line
essentially repeats the arguments summarised in this Section.
393
Case T-328/03 O2 (Germany) [2006] ECR II-1231, paragraphs 66-72.
394
See, to that effect, Case T-419/03 Altstoff Recycling Austria AG v Commission, judgment of 22
March 2011 (not yet published), paragraph 79.
395
See, in that regard, Case T-461/07 Visa Europe Ltd and Visa International Service v Commission,
judgment of 14 April 2011 (not yet published), paragraphs 131 and 195.
104
sailings (since Color Line did not reduce its activity in response to new entry).
In addition, there was an almost immediate impact on prices. Color Line
lowered its prices in the tax-free shops aboard its ferries: in November 2006,
just a fortnight after Kystlink started sailing, Norwegian newspaper Verdens
Gang compared the two companies with respect to, inter alia, prices and
service. The newspaper reported that a sign was put up on board Color Line’s
ferries, informing passengers that “We have reduced our prices on strong
liqueur, fortified wine and tobacco as of 1 November 2006”,396 that is, as of the
date on which Kystlink started sailing. Color Line itself has confirmed that,
following entry by Kystlink, it “reduced prices on liquor, fortified wine and
tobacco. The price reduction was necessary to meet the strong competition from
Kystlink with aggressive price reductions.”397
436. While there is insufficient evidence to determine whether Color Line’s response
was simply the aggressive response of the incumbent operator seeking to protect
its position, or whether it felt a real competitive constraint imposed by Kystlink
(in particular in light of Kystlink’s limited service and the fact that Kystlink
exited the market after only two years),398 as soon as Kystlink entered the
market customers benefited from lower prices and increased output.
437. The Authority also concludes that the restrictive clauses at issue were not
necessary for the penetration of the market by Color Line, in particular in the
light of the limited investments it made on the route. Finally, the Authority also
carefully assesses the other barriers in the market that Color Line alleges
contributed to the lack of new entry in the relevant market during the relevant
period. In particular, it has concluded that the tax-free regime in place until
2002 did not amount to an absolute barrier to entry (Section 5.4.8 above).
5.4.10
Color Line’s harbour agreements with Norwegian ports
438. The Authority considers that Color Line’s long-term exclusivity in Torskholmen
is sufficient to find an infringement of Article 53(1), given that in order to
operate a route that competed with Color Line access to harbours in both
Sweden and Norway was necessary.
439. Color Line also entered into long-term exclusive arrangements on the
Norwegian side of the route, with the Municipality of Sandefjord. The first
formal written agreement entered into by Color Line (at the time Scandi Line
396
Event # 540104, article from Verdens Gang of 15 November 2006 (unofficial translation from
Norwegian by the Authority: “Vi har redusert våre priser på sprit, hetvin og tobakk fra 1. november”).
397
Event # 430419, reply of Color Line dated 19 July 2007, p. 26.
398
Color Line’s own assessment in its Reply to the SO is to the effect that the very limited time period
during which Kystlink operated on the market “is far from sufficient to give a definite picture of what
the effect on prices and production with competition on the market would become over time”. It also
states that, in its view, “the adjustment of prices and production that took place after Kystlink’s entry,
was far from representative of a sustainable price level in the market over time”, event # 553056,
Color Line’s Reply to the SO, paragraphs 1107-1108.
105
AS) with the Municipality of Sandefjord was in 1991.399 The duration of the
agreement was 15 years; thereafter, Color Line was entitled to a further 10-year
term.
440. Pursuant to clause 13 of the agreement, the Municipality undertook not to enter
into agreement with any third parties concerning landing rights for car or
passenger ferries on routes between Sandefjord and destinations on the Swedish
coast situated between the Norwegian border and Gothenburg, as long as Color
Line’s ferry activities were operated in a satisfactory manner.
441. Upon expiry of the initial term of the agreement in early 2006, on Color Line’s
initiative a new 10-year agreement was entered into, with a right to a further 10year extension upon expiry.400 Under that new agreement, Color Line enjoys an
exclusive right to use the areas and facilities rented out under the agreement.
442. In addition, the public harbour of Larvik, located 20 km to the south of
Sandefjord, has been used by Color Line for routes to Denmark for many years.
The Authority understands that Color Line’s predecessor, LarvikFrederikhavnferjen,401 which was acquired by Color Line in 1997, entered into
an agreement in Larvik in 1985, of 25 years’ duration, for the lease of a terminal
building and the ramp and quay in Larvik Central Harbour, with a view to
providing ferry services on the route between Larvik and Hirtshals in
Denmark.402
443. In its Reply to the SO, Color Line does not “exclude that it would be possible to
develop the western harbour area [of Larvik], on the inside of the western
berth, for ferry operations”. Even though the entire harbour was limited to the
north by the railway, there were, according to Color Line, areas westwards
towards the Fritzøe berth that seemed adequate as lining-up areas.403
444. It nevertheless appears that through its 1985 agreement Color Line controlled
the existing harbour facilities in the public harbour of Larvik for 25 years, that
potential competitors at best would have had to establish new harbour facilities
adjacent to Color Line’s existing facilities or alternatively at Revet outside the
centre of Larvik.
399
Event # 401821, rental agreement between Scandi Line AS and the Municipality of Sandefjord,
annex 5 to Color Line’s reply of 4 December 2006, p. 19.
400
Event # 413823, the Municipality of Sandefjord’s reply to question 4e, and event # 413828, annex
23 (p. 89); event # 401821, annex 5 to Color Line’s reply of 4 December 2006, p. 28-40.
401
Larvik-Frederikhavnsferjen changed its name to Larvik Line in 1988 and was incorporated into
Color Line in 1997.
402
Event # 371073, p. 42 (PAB 9). The duration of the agreement was laid down in a 1994 addendum
in the form of a letter from Larvik harbour, which confirms that the agreement was valid until 25
November 2009 (i.e. 25 years from the signature of the agreement), and that the ferry company would
enjoy a preferential right to leasing the facilities if they were still to be leased after that date (event #
371073, p. 45 (PAB 9 4/4)).
403
106
445. While it seems that Larvik-Strømstadlinjen AS was at one stage promised
access to Revet in 2001 (see above, paragraph 177), it appears that such access
would only have been provided by means of the construction of a “temporary
facility” outside the central harbour.404 The long-term viability of such a
solution was therefore questionable and, indeed, it was never taken up.
446. In 2003, Larvik Municipality decided to move its ferry harbour out of the
central city area, and Color Line considered looking for alternatives. However,
it appears that Color Line was hesitant to give up its position in the existing
harbour and found that “abandoning Larvik and leaving the port open to other
operators seems risky.”405
447. While this Decision is limited to finding an infringement in respect of the
harbour agreement entered into by Color Line with the Municipality of
Strömstad, the fact remains that Color Line also ensured itself a long-term
presence in the public and operative harbours of Sandefjord and Larvik. Both of
those harbours appear to have been of strategic importance for entry in the
relevant market.
448. The Authority considers that Color Line’s strong position in those harbours
strengthened Color Line’s overall position on the relevant market.
5.4.11
Conclusion on the restrictive effects of the harbour agreement
449. In the light of the above, the Authority considers that the long-term exclusivity
contracted in the harbour agreement concluded by Color Line with the
Municipality of Strömstad in 1991 prevented potential competitors from
accessing the relevant market, effectively foreclosing the market to new
entrants.
450. In the light of the characteristics of the market in question, the entry of a new
player would have created scope for further competition in a market
distinguished by monopoly. New entry would almost certainly have led to
positive effects on the market in terms of price, quality and variety of services.
In preventing new entry, the harbour agreement has caused appreciable negative
effects on the relevant market to the detriment of consumers, contrary to Article
53(1) EEA.
5.5
Effect on trade between Contracting Parties
451. Article 53 EEA requires that the agreement/conduct at issue “may affect trade
between Contracting Parties”. It is settled case law that that includes any
404
Event # 370985, p. 93 (PAB 61 1/2), letter from Larvik-Strømstadlinjen AS to the Municipality of
Strömstad dated 14 August 2000; and event # 440704, “Larvik klar for to Strømstadferjer”, article from
Østlandsposten, 20 June 2001.
405
Event # 371073, p. 41 (PAB 8 3/3), minutes from meeting dated 16 December 2003 (unofficial
translation from Norwegian by the Authority: “Å forlate Larvik og legge havnen åpen for andre aktører
synes risikabelt”). Eventually, the Authority understands, the ferry operations (of Color Line) in Larvik
were moved to a new harbour at Revet in 2008 and the old harbour area was surrendered to other uses
(http://www.larvik.havn.no/terminaler/ferjeterminal-revet-article32-119.html).
107
“influence, direct or indirect, actual or potential, on the pattern of trade
between EEA states”.406
452. During the period under examination Color Line was the sole supplier on the
relevant market. Color Line’s turnover on the route increased year-by-year from
1994, peaking at NOK 899.7 million (EUR 112 million) in 2005 (see paragraph
68 above). The number of passengers on the route also increased over the
period, reaching 1.2 million passengers in 1999 and remaining at or above that
level until 2005 (with the exception of a slight dip in 2001, see paragraph 67
above).
453. International ferry services are by their very nature cross-border. The impact of
the harbour agreement on the possibilities for competitors to establish a service
in competition with Color Line between Sweden and Norway on the relevant
market is sufficient to establish that the harbour agreement was capable of
appreciably affecting intra-EEA trade within the meaning of Article 53(1) EEA.
5.6
Conclusion on Article 53(1) EEA
454. In the light of all the above, the Authority finds that the harbour agreement
infringed Article 53(1) EEA.
6
ARTICLE 53(3) EEA
6.1
Introduction
455. Article 53(3) of the EEA Agreement sets out an exception rule, which provides
a defence to undertakings against a finding of an infringement of Article 53(1)
EEA. Agreements, decisions of associations of undertakings and concerted
practices caught by Article 53(1) which satisfy the conditions set out in Article
53(3) are valid and enforceable, no prior decision to that effect being
required.407
456. It follows from the cumulative nature of the conditions in Article 53(3) that
once it has been found that one of those conditions has not been met, it is, in
principle, unnecessary to examine the remaining conditions.
457. In order to meet the criteria under Article 53(3) EEA, an agreement/conduct
falling within Article 53(1) must contribute to improving the production or
distribution of goods or to promoting technical or economic progress (first
condition), while allowing consumers a fair share of the resulting benefits
(second condition), and not imposing restrictions which are not indispensable to
the attainment of these objectives (third condition), and not affording such
undertakings the possibility of eliminating competition in respect of a
substantial part of the products concerned (fourth condition).
406
Guidelines on the effect on trade concept contained in Articles 53 and 54 EEA, OJ C 291,
30.11.2006, p. 46 and EEA Supplement to the OJ No 59, 30.11.2006, p. 18, paragraph 23.
407
108
458. It follows from the Authority’s Guidelines on the application of Article 53(3)
that efficiencies are normally made within the confines of each relevant market
to which the agreement/conduct relates. However, in some cases, only
consumers in a downstream market are affected, in which case the impact of the
agreement/conduct on consumers must be assessed. What falls to be examined
in the present case is the extent to which efficiencies were generated within the
relevant market for passenger ferry services.408
459. Pursuant to the first condition in Article 53(3), the restrictive conduct at issue
must contribute to improving the production or distribution of goods or to
promoting technical or economic progress. The provision refers expressly only
to goods, but applies by analogy to services.409
460. The purpose of the first condition in Article 53(3) is to define the types of
efficiency gains that can be taken into account and be subject to the further tests
of the second and third conditions in Article 53(3). The aim of the analysis is to
ascertain what the objective benefits created by the conduct are and the
economic importance of such benefits. Given that for Article 53(3) to apply the
pro-competitive effects flowing from the agreement must outweigh its anticompetitive effects, it is necessary to verify the link between the agreement and
the claimed efficiencies and the value of these efficiencies.410
461. It is clear from the Authority’s Article 53(3) Guidelines that efficiencies of a
qualitative nature creating sufficient value for consumers to compensate for the
anti-competitive effects of the agreement/conduct can be relevant for the
application of Article 53(3). Technical and technological advances form an
essential and dynamic part of the economy, generating significant benefits in the
form of new or improved goods and services.411
462. In that regard, significant upfront investments can, in certain circumstances,
justify vertical restrictions of limited duration, including exclusivity, as they can
lead to efficiencies, in particular to promoting non-price competition and
improved quality of services.412 When applying Article 53(3) it is necessary to
take into account the initial sunk investments made by any of the parties and the
time needed and the restraints required in order to commit to and to recoup an
efficiency enhancing investment.413
463. Exclusivity agreements lasting longer than five years are, for most types of
investment, not considered necessary to achieve the claimed efficiencies, or the
408
409
410
411
Guidelines on the application of Article 53(3) EEA, paragraphs 69-70, 102.
412
Guidelines on Vertical Restraints – see, for example, paragraphs 61, 106, 107b.
413
Guidelines on the application of Article 53(3) EEA, paragraphs 44 and 80; Guidelines on Vertical
Restraints, paragraphs 123 and 202.
109
efficiencies are not considered sufficient to outweigh the foreclosure effects of
such long-term exclusivity.414
464. The second condition in Article 53(3) requires that consumers receive a fair
share of any efficiencies generated by the restrictive conduct. The concept of
‘fair share’ implies that the pass-on of benefits must at least compensate
consumers for any actual or likely negative impact caused to them by the
restriction of competition found under Article 53(1). In line with the overall
objective of Article 53 to prevent anti-competitive conduct, the net effect of the
conduct must at least be neutral from the point of view of those consumers
directly or likely affected by it. If such consumers are worse off following the
conduct, the second condition in Article 53(3) will not be fulfilled. The positive
effects of conduct must be balanced against and compensate for its negative
effects on consumers. When that is the case consumers are not harmed by the
conduct. Moreover, society as a whole benefits where the efficiencies lead
either to fewer resources being used to produce the output consumed or to the
production of more valuable products and thus to a more efficient allocation of
resources.415
465. Under the third condition in Article 53(3), an assessment of whether the
restriction of competition is indispensable for the attainment of the economic or
technical improvements is required.416 The decisive question is whether or not
the agreement and the individual restrictions therein make it possible to perform
the activity in question more efficiently than would likely have been the case in
the absence of the agreement or the restriction concerned.417 The restriction
must be the least restrictive possible in order to achieve the claimed
efficiencies.418
466. In some cases, a restriction may be indispensable only for a certain period of
time, in which case the Article 53(3) exception only applies during that period.
In making such an assessment it is necessary to take due account of the period
of time required for the parties to achieve the efficiencies justifying the
application of the exception. In cases where the benefits cannot be achieved
without considerable investment, account must, in particular, be taken of the
period of time required to ensure an adequate return on such investment.419
467. The fourth condition in Article 53(3) requires that the agreement/conduct must
not afford the undertaking(s) concerned the possibility of eliminating
competition in respect of a substantial part of the relevant products/services.
414
See, for example, Guidelines on Vertical Restraints, paragraph 195.
415
Guidelines on the application of Article 53(3) EEA, paragraphs 83 and 85.
416
417
Guidelines on the application of Article 53(3) EEA, paragraphs 73-74.
418
See, inter alia, Commission Decision 98/531/EC, Van den Bergh Foods Limited, OJ L 246,
4/09/1998, paragraph 241.
419
Guidelines on the application of Article 53(3) EEA, paragraph 81; Joined Cases T-374/94 European
Night Services and Others [1998] ECR II-3141, paragraph 230.
110
Ultimately, the protection of rivalry and the competitive process is given
priority over potentially pro-competitive efficiency gains which could result
from restrictive agreements. The last condition in Article 53(3) recognises the
fact that rivalry between undertakings is an essential driver of economic
efficiency, including dynamic efficiencies in the shape of innovation. In other
words, the ultimate aim of Article 53 is to protect the competitive process.420
When competition is eliminated the competitive process is brought to an end
and short-term efficiency gains are outweighed by longer term losses stemming
inter alia from expenditure incurred by the incumbent to maintain its position
(rent seeking), misallocation of resources, reduced innovation and higher
prices.421
468. The Authority’s Guidelines on the application of Article 53(3) specify that the
assessment of the fourth condition depends to a large extent on the degree of
competition existing prior to the agreement/conduct at issue and its impact on
competition.422
469. It follows from Article 2 of Chapter II of Protocol 4 to the Surveillance and
Court Agreement that the undertaking claiming the benefit of Article 53(3) EEA
bears the burden of proving that the conditions laid down in that Article are
fulfilled.423 The following Sections assess Color Line’s submissions with regard
to Article 53(3) EEA.
6.2
6.2.1
Color Line’s submissions
First and second conditions: improvement in the production or
distribution of goods / promotion of technical or economic progress;
benefit to consumers
470. Color Line has submitted the following arguments in relation to claimed
efficiencies.424
471. First, it claims that the assessment must have as its point of departure the
situation in 1991 when the harbour agreement was entered into. It argues that
the Authority largely bases its preliminary views in the SO on developments in
the years after the agreement was entered into, and makes no attempt to analyse
the situation and future prospects in 1991 or in the ensuing years. At that time,
Color Line needed to secure long-term future capacity in the harbours so that it
could invest in upgrades of harbours and tonnage, and thus increase its capacity
on the route and improve its services to its customers. To enable the
development of the route service there was a need for considerable harbour
420
See, in that regard, Case T-461/07 Visa Europe Ltd and Visa International Service v Commission,
judgment of 14 April 2011 (not yet published), paragraph 126 and the case law cited therein.
421
422
423
See also Joined Cases C-501/06 P, C-513/06 P, C-515/06 P and C-519/06 P GlaxoSmithKline
Services v Commission [2009] ECR I-9291, paragraph 82.
424
111
investment and investment in new tonnage as well as, subsequently, in
marketing the expanded service offer. The expansion required predictability and
flexibility with regard to access to harbours on both sides, particularly given the
capacity limitations in the harbours. The long duration of the harbour agreement
provided predictable conditions for access to the harbour and for Color Line’s
ferry operation, and increased predictability of return on the risky investments
required, thus making it possible for Color Line to invest in a developed offer.
Undisturbed harbour access was a precondition for Color Line to be able to
exercise its planned activity and for the investments to be made.425
472. Secondly, Color Line submits that its investments led to significant
improvements on the Sandefjord – Strömstad route: operations are more reliable
with two vessels, which are larger and of higher quality than previously;
departures are more frequent; and consumers enjoy increased flexibility.
According to Color Line, the quality of its services has improved through better
on-board services and better facilities in the harbours. The growth in passenger
numbers since 1991 provides clear evidence of the fact that the harbour
agreement contributed towards improving production and furthering economic
development in the relevant market. These developments have, Color Line
argues, been beneficial to both private individuals and transport firms that have
used Color Line’s services since 1991.426
473. Thirdly, Color Line argues that if the harbour agreement had allowed competing
routes to be freely established in the harbour, Color Line would not have had
any guarantee that the harbour would have had the capacity to accommodate its
expansion in the 1990s. The most direct threat would have been a lack of
sufficient physical capacity in the harbour to allow Color Line to operate the
route with a second vessel from 1992 onwards, that its ferries would not have
been able to call at the harbour at the times Color Line desired, and that the
areas required to service larger ferries would have been unavailable. If Color
Line had had to adapt to the calls of other operators using the harbour that could
also have led to less efficient exploitation of its tonnage capacity (its sailing
plan could have become less efficient). A further possible consequence could
also have been insufficient space for night mooring at berth for two ferries, so
that Color Line would have had to find alternative options for night mooring,
with the ensuing costs and disadvantages.427
474. Fourthly, Color Line claims that predictable harbour access contributed to
combating “free-rider” problems, in that the investments it made to develop the
service between Sandefjord and Strömstad could not be exploited by competing
operators. The risk of other operators being given access to the harbour facilities
that Color Line used and to all or part of the onshore facilities developed for its
425
426
427
112
operation, would have reduced the return on Color Line’s investments and thus
influenced its willingness to invest at all.428
475. Fifthly, Color Line argues that there was considerable uncertainty as to the
framework conditions linked to its ferry operation. The sale of tax-free goods
on-board was decisive in order to be able to run the route profitably. At the
same time, there was uncertainty about the duration of the permit, both as a
consequence of the possibility of Norway entering the EU in the early 1990s,
with the result that tax-free sales would then cease, and because during certain
periods there was considerable political uncertainty as to the continuation of
tax-free sales on short-haul routes. According to Color Line, this uncertainty
contributed to the general future prospects for the route and, therefore, towards
an increased investment risk. Predictability regarding harbour access
contributed to reducing the overall investment risk and thus to stimulating the
investments and the expansion of services that have taken place since 1991.429
476. In summary, Color Line argues that the harbour agreement contributed to the
realisation of considerable investments in a service offer that had not been
developed before the agreement was entered into. The agreement, including the
exclusivity clause at issue, laid the foundation for considerable investments in
new tonnage, facilities and infrastructure in the harbour and the marketing of the
service to end-users. Predictability regarding available capacity during a longterm planning horizon was essential in this context. The outcome was a welldeveloped and stable service of high frequency and high popularity among
consumers, and a stable transport connection for transport companies and other
professional users. Thus, the harbour agreement led to an improvement in
production and furthered the economic development of the areas influenced by
the route. Those improvements have benefited consumers.
6.2.2
Third condition: indispensability
477. Color Line’s arguments in respect of the third condition essentially repeat its
claims in relation to the first and second conditions.430 It makes no arguments in
relation to whether the restrictions were the least restrictive possible in order to
achieve the claimed efficiencies. In short, Color Line argues that predictable
access to the harbour facilities concerned was indispensable in order for it to
undertake the investments it made following conclusion of the harbour
agreement in 1991. The realisation of those investments required predictability
that the capacity in the harbour would not be tied-up by other activities in the
harbour. Predictability was especially critical as a consequence of the limited
capacity in the harbour and the high frequency of sailings on the route.
478. Although Color Line did not at all times exploit the full capacity in
Torskholmen, Color Line argues that it was essential for the realisation of its
investments for it to have the possibility of expanding capacity over time. The
428
Event # 553056, Color Line’s Reply to the SO, paragraphs 948 and 964.
429
430
113
new tonnage added in 1994 and 2000 had larger on-board capacity, entailing
increased pressure on the on-shore areas in terms of use. The increase in
frequency to six daily departures also required increased available capacity in
the harbour.
479. If other operators had been granted access to the harbour, such capacity
expansions would not have been possible. Color Line claims that it is therefore
not correct that during certain periods in the 1990s there was spare capacity in
the harbour, as argued by the Authority. Rather, the subsequent capacity
expansions by Color Line confirm the need for predictability regarding capacity
in order for Color Line to have been able to realise investments in tonnage and
service expansion to meet market demand.
480. Color Line argues that the agreements were also necessary to prevent potential
new entrants from exploiting its investments (free-riding).
481. Finally, Color Line argues that the Municipalities in Sandefjord and Strömstad
also wished to provide the conditions for investments in ferry services between
the two cities. The Municipalities had experienced several failed attempts at
establishing a route, and saw the need for investments in both on-shore facilities
and tonnage to develop the service. The Municipalities made substantial
contributions to the development, both by providing access to areas and by
contributing towards the required investments in harbour facilities and offering
reduced fees for the first 10 years. To effect this development it was essential
for the Municipalities to ensure that Color Line had a long-term perspective,
thus entering agreements that provided the conditions for long-term operation
and development of the service. In a situation where total harbour capacity was
severely limited, it was necessary for the Municipalities to give Color Line
certainty that the possibility of exercising the activity in the harbours would not
be hindered over time as a consequence of other ferry operators occupying
substantial parts of the available capacity.
6.2.3
Fourth condition: elimination of competition
482. Color Line has argued in its Reply to the SO that its long-term exclusivity did
not constitute a substantial barrier to competitors on the relevant market.431
483. First, it claims that the principal entry barrier for competing services until June
2002 was not access to harbours, but rather the inability to obtain a licence for
tax-free on-board sales (see Sections 3.6 and 5.4.8 above). The long-term
exclusivity granted to Color Line did not therefore constitute any additional
barrier to competing services before June 2002.
484. Secondly, Color Line claims that there were available alternative harbour
facilities for potential competitors during the entire period under examination.
As a result, Color Line was exposed to potential competition from routes
between alternative harbours during the entire period.
431
Event # 553056, Color Line’s Reply to the SO, chapters 11.3 – 11.6.
114
485. Thirdly, Color Line claims that it follows from the conduct of the Municipality
of Strömstad that Color Line’s exclusivity was not respected by the
Municipality. The harbour agreement was not therefore a barrier to the
establishment of competing services wishing to use Torskholmen in Strömstad
as a port of call.
6.3
6.3.1
Assessment of Color Line’s submissions
First condition: improvement in the production or distribution of goods /
promotion of technical or economic progress
486. As regards the point of depature for the analysis, it is recalled that the
assessment of restrictive agreements under Article 53(3) is made within the
actual context in which they occur and on the basis of the facts existing at any
given point in time. The assessment is thus sensitive to material changes in the
facts. The exception rule in Article 53(3) applies as long as the four conditions
are fulfilled and ceases to apply when that is no longer the case.432
487. Article 53(3) requires Color Line to identify and determine the specific nature
of the efficiencies generated by the long-term exclusive harbour agreement – in
other words, it must demonstrate a causal link between the exclusive harbour
agreement and the efficiencies – and demonstrate how and when each claimed
efficiency would be achieved. In order to establish that the efficiencies
generated outweigh their anti-competitive effects, it must establish the
likelihood and magnitude of such efficiencies.433
488. Color Line must also justify that its long-term exclusivity was necessary in
order to achieve the claimed efficiencies. That is essentially a question of
indispensability, which is assessed in Section 6.3.3 below.
489. As regards Color Line’s asserted need to secure long-term future capacity in the
harbour in order to develop the service it provided on the Sandefjord to
Strömstad route and make it possible for it to invest, the Authority notes that the
question is to what extent the long-term exclusive harbour agreement created
economic benefits.
490. While the developments in the harbour may have led to improvements and
enhancements to the service on the route, Color Line has not demonstrated a
causal link between the exclusive harbour agreement and the claimed
improvements or enhancements. It simply asserts that long-term future capacity
in the harbour was necessary in order to develop the service. In that regard, the
Authority notes that Color Line made relatively limited initial sunk investments
at the time the harbour agreement was entered into, and has provided no
evidence of planned expansion at the time of the agreement. Moreover, between
1995 and 2000 Color Line experienced a surge in demand, which to a large
extent was the result of factors external to Color Line and not to risky
investments on the part of Color Line (see paragraph 66); its principal
432
433
115
investments in tonnage appear to a large extent to have been made reactively, in
response to that increase in demand. In addition, Color Line introduced the
vessel Color Viking on the route in 2000 at least in part in order to fend off the
threat from potential new entrants (see paragraphs 165-166 above).
491. Further, in the light of the assessment of capacity constraints in Section 5.4.6
above, the guarantee inherent in the long-term exclusive agreement that the
harbour would have capacity to accommodate any future expansion by Color
Line (to the detriment of potential new entrants and, thus, to the competitive
process) cannot be recognised as an economic benefit as such under the first
condition of Article 53(3).
492. As to the risk of free-riding on Color Line’s investments, it is noted, firstly, that
Color Line has not set out in any detail in its Reply to the SO that there was a
real free-rider problem or that free-riding was perceived as a risk by Color Line
at the relevant time. Secondly, Color Line’s investments at Torskholmen were
very limited in comparison to its turnover and profits on the route and were
quickly recouped. Thirdly, Color Line could, presumably, have charged for use
of its facilities/investments to the extent competitors had needed access thereto
in order to operate at Torskholmen. Fourthly, the Municipalities also invested in
the harbours, both upfront and through significant reductions in harbour fees
over a considerable period of time, as Color Line itself points out in its
arguments (see paragraphs 45 and 481 above). It is therefore very unlikely, in
the light of these considerations, that the threat of free-riding created any real
and significant risk of under-investment.
493. Consequently, the Authority takes the view that Color Line has not in any way
demonstrated that its agreement generated efficiency gains that consisted in
preventing an alleged risk of free-riding detrimental to Color Line. In any event,
any such benefits could only have been very limited.
494. The alleged uncertainties as to the framework conditions (tax-free sales) linked
to Color Line’s ferry operations and the contribution of the harbour agreement
to reducing the overall investment risk are too indirect, uncertain and remote to
be taken into account.434 No evidence has been submitted by Color Line that
would tend to show that the reduction of investment risks was perceived by
Color Line at the time as an important feature of the harbour agreement.
Furthermore, investment risks would only be relevant to the extent that
investments were sunk. As will be explained below, that was only the case to a
limited extent. In any event, given that “the sale of tax-free goods on board was
decisive to be able to run the route profitably” (Reply to the SO, paragraph
949), it is not clear how long-term exclusivity in the harbour could have
alleviated any risk associated with any uncertainty as to the framework
conditions. Color Line does not provide any explanation in that regard.
Following the logic of the statement at paragraph 949 of the Reply to the SO, if
tax-free sales on short routes had been abolished Color Line’s operations on the
route would no longer have been viable, irrespective of exclusivity in the
434
116
harbour. In that light, it is not clear how economic benefits within the meaning
of the first condition in Article 53(3) could have been created by long-term
harbour access.
495. Overall, the Authority considers that it must be concluded that any efficiency
gains brought about by the long-term exclusive harbour agreement have either
been insufficiently substantiated or were, at best, limited in nature. For these
reasons, the Authority considers that the first condition in Article 53(3) is not
satisfied.
6.3.2
Second condition: benefit to consumers
496. The second condition in Article 53(3) EEA requires that any positive effect of
the harbour agreement must be balanced against and compensate for its negative
effects on consumers. Such negative effects are set out in detail in Section 5
above.435
497. The Authority does not dispute that the expansion of Color Line’s services on
the route, seen in isolation, resulted in some benefits to consumers. However, in
an alternative scenario with competing service providers in the relevant market
it must be assumed that consumers would have been better off than under
monopoly: it is recalled that Color Line maintained a monopoly position on the
relevant market throughout the period under examination.436 The substantial
increase in demand experienced during the period under examination would,
under normal circumstances, have created good prospects for new market entry
with ensuing benefits to consumers.
498. A restrictive agreement which maintains, creates or strengthens a market
position approaching that of a monopoly cannot normally be justified on the
grounds that it also creates efficiency gains. The reason for that is that in the
absence of rivalry between undertakings the dominant undertaking will lack
adequate incentives to continue to create and pass on efficiency gains to
consumers.437
435
436
See Guidelines on the application of Article 53(3) EEA, paragraph 92, which states that when
carrying out the balancing test between anti-competitive effects and pro-competitive effects it must be
taken into account that competition is an important long-term driver of efficiency and innovation:
“Undertakings that are not subject to effective competitive constraints — such as for instance dominant
firms — have less incentive to maintain or build on the efficiencies. The more substantial the impact of
the agreement on competition, the more likely it is that consumers will suffer in the long run”; and
437
See the Authority’s Guidelines on Vertical Restraints, paragraph 127: “Rivalry between
undertakings is an essential driver of economic efficiency, including dynamic efficiencies in the form of
innovation. In its absence, the dominant undertaking will lack adequate incentives to continue to create
and pass on efficiency gains. Where there is no residual competition and no foreseeable threat of entry,
the protection of rivalry and the competitive process outweighs possible efficiency gains. A restrictive
agreement which maintains, creates or strengthens a market position approaching that of a monopoly
can normally not be justified on the grounds that it also creates efficiency gains”; see also the
Commission’s Guidance Paper on Article 102 TFEU, paragraph 30, last indent.
117
499. In that light, and in the light of the, at best, limited economic benefits that have
been demonstrated under the first condition in Article 53(3) EEA, the long-term
restrictive effects caused by the harbour agreement, and Color Line’s monopoly
positition throughout the period under examination, the Authority takes the view
that Color Line has failed to show that the benefits of any efficiencies that can
be said to have been brought about by the harbour agreement outweigh the harm
to consumers resulting from its long-term exclusivity.
500. For these reasons, the Authority considers that the second condition in Article
53(3) is not satisfied.
6.3.3
Third condition: indispensability
501. The Authority is of the view that the effect of the long-term exclusivity granted
to Color Line was to prevent all potential competitors from accessing
Torskholmen for an exceptionally long period of time.
502. Color Line essentially argues that predictable access to the harbour facilities
concerned was indispensable in order for it to undertake the investments it made
following conclusion of the harbour agreement in 1991.
503. In order to be held to be indispensable to any claimed benefits, such long-term
exclusivity must have been required for substantial initial sunk investments that
were not recoupable in the short-term.438
504. It is generally considered, as a rule of thumb, that restrictive clauses in vertical
agreements should not exceed five years where market shares are below 30%.
With regard to exclusive supply arrangements, the Vertical Guidelines state that
arrangements which are:
“shorter than five years [and] entered into by non-dominant companies usually
require a balancing of pro- and anti-competitive effects, while agreements
lasting longer than five years are for most types of investments not considered
necessary to achieve the claimed efficiencies or the efficiencies are not
sufficient to outweigh the foreclosure effect of such long-term exclusive supply
agreements”.439
Investment in harbour facilities
505. Color Line’s investments in the Sandefjord – Strömstad route have been
described in Section 3.5 above. In total, from 1992 to 2006, Color Line claims
438
Guidelines on the application of Article 53(3) EEA, paragraphs 44 and 80-81; see also, Joined Cases
T-374/94, T-375/94, T-384/94 and T-388/94 European Night Services [1998] ECR II-3141, paragraph
230, where the European Court of First Instance stated: “Since, moreover, such progress and benefits
cannot be achieved without considerable investment, the length of time required to ensure a proper
return on that investment is necessarily an essential factor to be taken into account when determining
the duration of an exemption …”; and Guidelines on Vertical Restraints, paragraph 117. See above,
Section 6.1.
439
118
that it made investments in Torskholmen amounting to NOK 31.5 million.440
The amounts invested can broadly be divided as follows:
a. 1992: NOK 12.8 million,441 relating to construction of a terminal
building.
b. 1995 to 1997: SEK 467 000 per year in increased harbour fees for
works carried out by the Municipality.
c. 1999: NOK 7.7 million to upgrade the ramp.
d. 2000: NOK 4.1 million on constructing new customs facilities and
NOK 0.7 million on adapting the quay to the new vessel Color Viking.
506. In Sandefjord, Color Line states that its total investments in the harbour since
1991 amount to NOK 19 million. The largest single investment, of
approximately NOK 7.5 million, was made in 1992 to upgrade the existing
terminal building and the tube.442
507. First, the Authority points out that the investments made by Color Line in
harbour facilities were very limited in comparison to Color Line’s turnover and
profits on the route and must have been quickly recouped. Color Line’s total
turnover on the route in the period from 1993 to 2005 (Color Line has not
provided accounts for the period prior to 1993) amounted to approximately
NOK 8 billion. Turnover on the route in 1993 already amounted to NOK 239.6
million, and net profits after tax to NOK 44.5 million.443
508. Secondly, these investments were far from large initial sunk investments: they
were all made after the harbour agreement came into force, in some cases many
years after its conclusion. In addition, Color Line had already been operating on
the route for a number of years, and with exclusivity in Torskholmen from July
1989, when the 1991 harbour agreement was entered into (see Section 3.3
above). Therefore, at the very least in comparison with the launch of a
completely new product or service on the market, Color Line must have had a
reasonable degree of certainty as to the likely success of its ferry operation at
the time of the 1991 harbour agreement.444 Finally, as already noted, some of
Color Line’s investment risks were offset by harbour fee/tax rebates from the
Municipality of Strömstad (see Section 3.3 above).
509. In that light, Color Line has not demonstrated that the investments in harbour
facilities justify the long-term exclusivity granted in the harbour agreement.
440
See event # 553056, Color Line’s Reply to the SO, paragraphs 205-207.
441
Event # 401815, annex 10.1 to Color Line’s reply of 4 December 2006.
442
443
Event # 401819, p. 4, annex 2.2 to Color Line’s reply of 4 December 2006.
444
See, in that regard, the Authority’s Guidelines on the application of Article 53(3) EEA, paragraph
80, which provide that the more uncertain the success of the product covered by the agreement, the
more a restriction may be required in order to ensure that the efficiencies will materialize.
119
Investment in tonnage
510. According to the information provided by Color Line, it invested NOK 59.2
million in tonnage on the route prior to the 1991 harbour agreement (see Section
3.5.3 above). Those investments are irrelevant to the assessment of the 1991
harbour agreement under Article 53(3) EEA since that agreement could not
have any influence on Color Line’s incentives to invest prior to its conclusion.
511. In the initial years after the conclusion of the 1991 harbour agreement, it
appears that Color Line invested NOK 195 million in tonnage on the route (M/S
Sandefjord and M/S Bohus). Even assuming that such an investment can be
taken into account as an upfront investment, Color Line has not demonstrated
that the total amount of that investment was sunk: the NOK 195 million
investment in tonnage is a gross figure, from which the sales of M/S Bohus II
and MS Sandefjord in the same period have not been deducted.445 This
investment cannot be seen as sunk in its entirety given the resale value on the
market of the vessels in question and the fact that they could be deployed on
other routes or leased to other operators. Far from the whole investment in these
vessels would be likely to have been lost if Color Line had had to exit the
relevant market. Only to the extent that investments in vessels were sunk could
Color Line argue that it needed long-term access to harbours in order to recoup
those investments.
512. In 2000, Color Line introduced Color Viking on the Sandefjord – Strömstad
route and invested NOK 210 million in that regard. Again Color Line has not
shown to what extent that investment was a sunk cost. In any event, the need to
recoup an investment made in 2000 cannot justify an exclusivity agreement
which was entered into approximately nine years prior to that investment.
513. On the basis of the available information, the Authority must consider that the
investments made in vessels were only to a limited degree sunk. The sunk
investments must therefore be regarded as rather modest. That is particularly the
case when compared to the significant earnings Color Line enjoyed on the route.
Marketing costs
514. Finally, Color Line refers to marketing costs, providing data for the years from
1994 to 2005, during which it states that total investment in marketing, which it
claims was a risky investment in the circumstances, amounted to NOK 275.7
million.446
515. Color Line has itself explained that marketing is carried out primarily at local
and regional levels – partly through local and regional media, sponsoring and
the like, partly as direct marketing towards customers – and that the repurchase
percentage
is
high
among
parts
of
the
customer
base.
445
446
Event # 553056, Color Line’s Reply to the SO, paragraphs 259 and 943. Color Line has provided
information regarding both its marketing costs and its accounts for the period 1994-2005. For the
accounts see event # 401819.
120
[…………………………………………………………………………………
……………………………………………………………………………………
……………………………………………………………………………………
……………………………………………………………………………………
……………………………………………………………………………………
……………………………………………………………………………………
…………. ].447
516. In that light, and in the absence of more precise information provided by Color
Line, it must be assumed that to a large extent the marketing costs were geared
towards increasing demand in the short term, and that a large part of those costs
were recouped the same year they were incurred.
517. In other words, Color Line’s specific marketing costs on the route in question
cannot be regarded as large initial sunk investments, but a re-occurring expense
recouped in the short term. Those costs cannot therefore justify the long-term
exclusivity.
The restrictions in the harbour agreement were not the least restrictive possible
518. As already stated (paragraph 477), Color Line makes no arguments in relation to
whether the restrictions were the least restrictive possible in order to achieve the
claimed efficiencies.
519. In the Authority’s view, Color Line could have ensured itself harbour access in
Sweden by less restrictive means. When making investment in new tonnage for
example, it could have required a sufficient number of slots in Torskholmen for
a sufficient period of time to ensure a reasonable return on its investments. At
the very least, due to the limited initial sunk investments, a much shorter
exclusive agreement would have sufficed to provide Color Line with the
required incentives to invest.
520. As regards the possibility that competitors could exploit Color Line’s
investments, to the extent that there was a real free-rider problem (paragraphs
492-493 above), Color Line has not at all justified that a 25-year exclusivity
period was a necessary and proportionate means to protect its investment or to
increase its incentives to invest. The same applies in relation to the alleged
benefits relating to the contribution of the harbour agreement to reducing any
uncertainty pertaining to framework conditions, even if such benefits were to be
accepted (paragraph 494 above).
The Municipality’s alleged need to give Color Line certainty
521. Color Line’s claim that it was essential for the Municipality to ensure that Color
Line had a long-term perspective and that it was necessary for it to give Color
Line certainty (paragraph 481) cannot justify the exclusivity. First, that does not
take away the restrictive effects of the exclusivity; nor is it clear why that
alleged need created economic benefits in the first place that are unrelated to the
447
121
size of Color Line’s initial sunk investments. Secondly, as already stated above
(paragraph 144), the evidence suggests that it was Color Line that took the
initiative to conclude the long-term harbour agreement with the Municipality of
Strömstad and was eager to obtain exclusive access to Torskholmen, while the
Municipality merely regarded it as an advantage to have a long-term user in the
harbour.448 Thirdly, even if it were to be accepted that there was a perceived
need on the part of the Municipality of Strömstad to give Color Line certainty
and that such a need could be related to an underlying economic benefit, it is not
apparent from the information submitted by Color Line why long-term
exclusivity of 25 years was a reasonable and proportionate means of achieving
that benefit.
Conclusion
522. Against this background, the duration of the exclusivity granted to Color Line
went way beyond what was acceptable and was fundamentally disproportionate
to, and cannot be justified by, the limited sunk investments made by Color Line
in the harbour and in tonnage, free-rider concerns or a perceived need on the
part of the Municipality of Strömstad to give Color Line certainty. The
Authority thus concludes that Color Line has not demonstrated that the
indispensability condition laid down in Article 53(3) EEA is satisfied.
6.3.4
Fourth condition: elimination of competition
523. As already stated, whether competition is eliminated within the meaning of the
last condition of Article 53(3) depends on the degree of competition existing
prior to the agreement and on the impact of the agreement on competition. The
more competition is already weakened in the market concerned, the slighter the
further reduction required for competition to be eliminated within the meaning
of Article 53(3). The greater the reduction of competition caused by the
agreement, the greater the likelihood that competition in respect of a substantial
part of the products concerned risks being eliminated.449
524. The actual market conduct of the parties can provide insight into the impact of
the agreement. If, following the conclusion of the agreement, the parties have
engaged in conduct indicative of the existence of a considerable degree of
market power, it is an indication that the parties are not subject to any real
competitive pressure and that competition has been eliminated with regard to a
substantial part of the products concerned.450
525. The Authority notes that there was no competition on the relevant market prior
to the 1991 harbour agreement. Indeed, even before that time, there was no
scope for actual competition: as already noted, from 1 July 1989 Color Line also
448
Event # 408737, reply from the Municipality of Strömstad to question 7a (“Rederiet tog initiativ till
förhandling om upprättande av ett arrandeavtal [...] Rederiet var angeläget att ha en exklusiv tillgång
til ramp och uppställningsplats. Från kommunens sida ansågs det fördelaktigt med en långsiktig
brukare av hamnen.[…]”).
449
450
122
had exclusive access to the facilities in Torskholmen.451 As regards potential
competition, the Authority has examined in detail above the scope for potential
competition (Section 5.4), analysing the barriers to entry faced by potential new
entrants, including conduct engaged in by Color Line indicative of market
power, and reached the conclusion that barriers to market entry were high and
that there was a lack of genuine harbour alternatives for new entry within a
reasonable time frame. The possibilities for placing real competitive pressure on
Color Line, the monopoly operator, during the relevant period, were therefore
severely limited. Thus, Color Line’s long-term exclusivity foreclosed potential
competitors from accessing the relevant market for passenger ferry services (as
defined above) and effectively enabled Color Line to reserve, for the entire
period under examination, that market to itself.
526. It follows that the long-term exclusivity granted to Color Line does not meet the
fourth condition in Article 53(3) EEA.
6.4
Conclusion on Article 53(3) EEA
527. In the light of the above, the Authority does not consider that Color Line has
shown that the conditions laid down in Article 53(3) EEA are satisfied.
7
ARTICLE 54 EEA
528. Article 54 of the EEA Agreement prohibits any abuse by one or more
undertakings of a dominant position within the territory covered by the EEA
Agreement or in a substantial part of it as incompatible with the functioning of
the EEA Agreement insofar as it may affect trade between Contracting Parties.
Pursuant to point (b) of the second paragraph of Article 54, such abuse may, in
particular, consist of limiting production or markets to the prejudice of
consumers.
529. Article 54 EEA is identical in substance to Article 102 TFEU. Pursuant to
Article 6 EEA and Article 3(2) of the Surveillance and Court Agreement the
case law of the ECJ and the General Court is therefore relevant for the
interpretation of Article 54 EEA.452 In the same way as for Article 53 EEA, it is
a fundamental objective of the EEA Agreement to ensure uniform interpretation
of those provisions.453
530. The Authority is of the view that the long-term exclusivity held by Color Line
under the harbour agreement concluded with the Municipality of Strömstad in
1991, which foreclosed competition on the relevant market (as defined in
Section 4 above), also constituted an abuse by Color Line of its dominant
position on that market.
451
Event # 553056, Color Line’s Reply to the SO, paragraph 211 and attachment 11.
452
See Case E-3/97 Jan and Kristian Jæger AS [1998] EFTA Ct. Rep. 1, paragraph 19; and Case E8/00 Landsorganisasjonen i Norge [2002] EFTA Ct. Rep. 114, paragraph 39.
453
Case E-8/00 Landsorganisasjonen i Norge [2002] EFTA Ct. Rep. 114, paragraph 39.
123
7.1
Jurisdiction
531. Pursuant to Article 56(2) of the EEA Agreement, the surveillance authority in
whose territory a dominant position is found to exist is competent to examine an
alleged abuse of a dominant position within the meaning of Article 54 EEA.
532. In this case, the dominant position at issue is on the relevant market for
passenger ferry services (as defined above). In that market, Color Line operated
a route between two EEA ports during the period under examination: the
Norwegian port of Sandefjord, which is located within the jurisdiction of the
Authority, and the Swedish port of Strömstad, which is located within the
jurisdiction of the European Commission. Therefore, Color Line’s dominance
covers the territories of both surveillance authorities, and, therefore, by virtue of
the second sentence of Article 56(2), the rules set out in Articles 56(1)(b) and
(c) apply.
533. As set out in Section 5.2 above, the application of the relevant turnover
thresholds referred to in Article 56(1) results in the Authority being the
competent authority also insofar as this case falls under Article 54 EEA.
534. In that light, the Authority is the competent surveillance authority within the
meaning of Article 56(2) EEA with regard to the application of Article 54 EEA
in this case.
7.2
Color Line as a dominant undertaking
535. Color Line is an undertaking within the meaning of the EEA competition rules
(see Section 5.3 above).
536. The assessment of whether an undertaking is in a dominant position and of the
degree of market power it holds is a first step in the application of Article 54 of
the EEA Agreement. According to the case-law, holding a dominant position
confers a special responsibility on the firm concerned, the scope of which must
be considered in the light of the specific circumstances of each case.454
537. The dominant position referred to in Article 54 EEA relates to a position of
economic strength enjoyed by an undertaking which enables it to prevent
effective competition from being maintained on the relevant market by
affording it the power to behave to an appreciable extent independently of its
competitors, its customers and ultimately of consumers.455
454
Case 322/81 Nederlandsche Banden Industrie Michelin (Michelin I) v Commission [1983] ECR
3461, paragraph 57; Case T-83/91 Tetra Pak v Commission (Tetra Pak II) [1993] ECR II-755,
paragraph 114; Case T-111/96 ITT Promedia v Commission [1998] ECR II-2937, paragraph 139; Case
T-228/97 Irish Sugar v Commission [1999] ECR II-2969, paragraph 112; and Case T-203/01 Michelin
v Commission (Michelin II) [2003] ECR II-4071, paragraph 97.
455
Case 27/76 United Brands v Commission [1978] ECR 207, paragraph 65; Case 85/76 Hoffmann-La
Roche v Commission [1979] ECR 461, paragraph 38.
124
538. Such a position is consistent with some degree of competition, but it enables the
undertaking in question at least to have an appreciable influence on the
conditions under which that competition will develop.456
539. In determining whether a market position is a dominant one within the meaning
of Article 54 EEA, it is settled case law that very high market shares, of over
50%, are in themselves, and save in exceptional circumstances, evidence that a
firm is dominant.457 Market shares between 70% and 80% have, according to
the case law, been held to be in themselves a clear indication of the existence of
a dominant position.458
540. In the period from 1986 until Kystlink entered the market in 2006, Color Line
was the sole, that is, the monopoly supplier on the relevant market as defined in
Section 4 above, with a market share of 100%.
541. Thus, Color Line was the only possibility for passengers seeking ferry services
on the relevant market throughout the period under examination. Most of Color
Line’s passengers on the route were individuals with limited or no buyer power:
therefore, they were unlikely to possess sufficient countervailing buyer power to
undermine Color Line’s market position.
542. The Authority has identified a number of barriers to entry in the relevant
market. They have been described in detail above in Section 5.4.3, and relate, in
particular, to: (i) Color Line’s market position, brand and reputation; (ii) a lack
of viable harbour alternatives due to structural, regulatory and commercial
barriers; and (iii) the special regime for tax-free sales on short-haul routes,
which represented a legal barrier to entry.
543. In the light of the above, the Authority concludes that Color Line enjoyed a
dominant position on the relevant market at least during the period under
examination.
544. The relevant market on which a dominant position is found to exist concerns the
provision of passenger ferry services between two EEA Contracting Parties. The
number of passengers in that market increased substantially over the period
under examination, reaching 1.2 million passengers in 1999 and remaining at or
above that level until 2005 (see paragraph 67 above). The turnover generated on
the route also increased year-by-year from 1994, peaking at NOK 899.7 million
(EUR 112 million) in 2005 (see paragraph 68 above). During the period under
examination Color Line was therefore dominant in a substantial part of the
EEA.
456
Case 85/76 Hoffman-La Roche v Commission [1979] ECR 461, paragraph 39.
457
Case 85/76 Hoffmann-La-Roche v Commission [1979] ECR 461, paragraph 41; Case T-83/91 Tetra
Pak v Commission [1994] ECR-II 755, paragraph 109.
458
Case T-30/89, Hilti v Commission [1991] ECR II-1439, paragraph 92, confirmed by the Court of
Justice in Case C-53/92 P Hilti v Commission [1994] ECR I-667.
125
7.2.1
Color Line’s submissions regarding dominance
545. Color Line argues that it was not dominant when it entered into the harbour
agreement in 1991 since it was still in the phase where it was establishing itself
on the relevant market. In 1991, it argues, market prospects and the very
foundation of the business were highly uncertain, in particular taking into
account previous failed entry attempts.459 In that regard, Color Line refers to the
Commission’s Guidelines on the applicability of Article 101 TFEU to
horizontal cooperation agreements,460 which provide that:
“If the R & D aims at developing a product which will create a complete new
demand, market shares based on sales cannot be calculated. Only an analysis of
the effects of the agreement on competition in innovation is possible.
Consequently, the R & D block exemption Regulation exempts these agreements
irrespective of market share for a period of seven years after the product is first
put on the market.”461
546. Color Line has also argued that the Authority failed to establish in the SO that it
was dominant from 1994 onwards. For a dominant position to exist it is required
that the undertaking can behave independently. In 1994, the route was
operative, but passenger numbers were still moderate. At that time, Color Line
argues, it is doubtful whether Color Line – at least in the market for harbour
services – possessed any kind of purchaser power. On the contrary, it claims
that at that time there was considerable uncertainty attached to Norway’s
potential EU membership and the ensuing loss of tax-free sales; as a result,
Color Line was perceived as an uncertain customer in the market. In that light,
Color Line claims that it is uncertain whether it held a dominant position when
the EEA Agreement entered into force on 1 January 1994.462
7.2.2
Assessment of Color Line’s submissions regarding dominance
547. The Commission’s Guidelines on the applicability of Article 101 TFEU to
horizontal cooperation agreements, which concern, inter alia, research and
development agreements, are not relevant to the provision of ferry services; nor
are the Guidelines relevant for the assessment of dominance under Article 54
EEA.
548. In any event, Color Line began its activities on the Sandefjord – Strömstad route
in 1986. It obtained a tax-free licence on 1 January 1988. From 1 July 1989,
Color Line had exclusive use of Torskholmen harbour under a four-year
(renewable) agreement with the Municipality of Strömstad, which was replaced
in 1991 by a further agreement granting exclusivity for 25 (15 plus 10) years
(see Section 3.3 above). Color Line faced no competition on the route until
November 2006. Thus, when Color Line entered into the harbour agreement on
459
460
(2001) OJ C 3/2, paragraph 54.
461
462
126
1 January 1991, it had already operated on the Sandefjord – Strömstad route for
five years, as a monopolist, with a 100% market share.
549. When the EEA Agreement entered into force on 1 January 1994, Color Line had
operated the route for a further three years without any exposure to competition.
550. As regards Color Line’s argument that the Authority failed in the SO to
establish that it was dominant from 1994, the Authority notes that Color Line
appears to be referring to the upstream market for harbour services. However,
this case is not about dominance in the upstream market for harbour services;
rather, it concerns the downstream market for ferry services (as defined in
Section 4.4 above), where it is undisputed that throughout the period under
examination Color Line was the sole ferry operator with its route between
Sandefjord and Strömstad. Moreover, the route had been operative for eight
years (since 1986) at that stage, and passenger numbers had already grown
significantly (see above, paragraph 67).463 Yet, Color Line faced no
competition. It is not clear how any uncertainty attached to Norway’s potential
EU membership and the ensuing loss of tax-free sales could impact upon Color
Line being in a dominant position at that time as Color Line claims.
7.2.3
Conclusion on dominance
551. In the light of the foregoing, the Authority concludes that throughout the period
under examination – that is, from 1 January 1994 to 20 December 2005 – Color
Line held a dominant position in a substantial part of the EEA within the
meaning of Article 54 EEA.
7.3
7.3.1
Abuse of dominance
The concept of abuse
552. The fact that an undertaking holds a dominant position is not in itself contrary to
the competition rules; rather it is the abuse of such a position that is prohibited.
553. It is settled case law that the concept of an abuse within the meaning of Article
54 EEA is:
“an objective concept relating to the behaviour of an undertaking in a dominant
position which is such as to influence the structure of a market where, as a
result of the very presence of the undertaking in question, the degree of
competition is weakened and which, through recourse to methods different from
those governing normal competition in products or services on the basis of
transactions of commercial operators, has the effect of hindering the
463
Event # 553056, Color Line’s Reply to the SO, paragraphs 156 and 1074. Color Line describes
passenger numbers in 1994 as “moderate” (Reply to the SO, paragraph 995), but the tables set out at
paragraphs 156 and 1074 of its Reply to the SO (see above at paragraph 67) show that passenger
numbers had risen from under 90,000 in 1986 to over 600,000 in 1994; and that from 1991 to 1994
passenger numbers doubled (from approximately 300,000 to over 600,000).
127
maintenance of the degree of competition still existing in the market or the
growth of that competition”.464
554. The effect referred to in that case law does not necessarily relate to any concrete
or actual effect of the dominant undertaking’s behaviour. For the purposes of
establishing an infringement of Article 54 EEA it is sufficient to show that the
conduct of the undertaking in a dominant position tends to restrict competition
or, in other words, that the conduct is capable of having or liable to have that
effect.465
555. An undertaking enjoying a dominant position is under a special responsibility
not to allow its conduct to impair genuine undistorted competition in the
internal market.466 That special responsibility requires it to ensure that its
conduct does not undermine effective and undistorted competition.467 Its scope
must be considered in the light of the specific circumstances of each case which
show that competition has been weakened.468
556. As a result, a dominant undertaking is subject to certain limitations that do not
apply to other undertakings. A practice that would be unobjectionable under
normal circumstances can amount to an abuse if carried out by an undertaking
in a dominant position.
557. Thus, it follows from the nature of the obligations imposed by Article 54 EEA
that, in specific circumstances, undertakings in a dominant position may be
deprived of the right to adopt a course of conduct or take measures which are
not in themselves abuses and which would even be unobjectionable if adopted
or taken by non-dominant undertakings.469 Similarly, the ECJ has held that the
strengthening of the position of an undertaking may be an abuse, “regardless of
the means and procedure by which it is achieved”, and even “irrespective of any
fault”.470
464
Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461, paragraph 91; Case 322/81
Michelin v Commission (Michelin I) [1983] ECR 3461, paragraph 70; Case C-62/86 AKZO v
Commission [1991] ECR I-3359, paragraph 69; Case T-228/97 Irish Sugar v Commission [1999] ECR
II-2969, paragraph 111; Case T-219/99 British Airways v Commission [2003] ECR II-5917, paragraph
241; Case T-271/03 Deutsche Telekom v Commission [2008] ECR II-477, paragraph 233.
465
Case T-203/01 Michelin v Commission (Michelin II) [2003] ECR II-4071, paragraph 239; Case T155/06 Tomra and Others v Commission, judgment of 9 September 2010, not yet published (under
appeal in Case C-549/10 P).
466
Case 322/81 Michelin v Commission (Michelin I) [1983] ECR 3461, paragraph 57.
467
Case 322/81 Michelin v Commission (Michelin I) [1983] ECR 3461, paragraph 57.
468
Joined Cases C-395/96 P and C-396/96 P Compagnie Maritime Belge Transports SA and Others v
Commission [2000] ECR I-1365, paragraph 114; Case T-83/91 Tetra Pak International SA v
Commission (Tetra Pak II) [1994] ECR-II 755, paragraph 115.
469
Case 322/81 Michelin v Commission (Michelin I) [1983] ECR 3461, paragraph 57; and Case T111/96 ITT Promedia v Commission [1998] ECR II-2937, paragraph 139.
470
Case 6/72 Europemballage and Continental Can v Commission [1973] ECR 215, paragraphs 27 and
29; Case T-128/98 Aéroports de Paris v Commission [2000] ECR II-3929, paragraph 170.
128
558. Article 54 EEA does not only aim at preventing practices that may cause
damage to customers or to consumers directly, but also those that are
detrimental to them through their impact on the competitive structure and thus
on competition as such.471
559. According to consistent case-law, the list of abusive practices contained in
Article 54 does not exhaust the methods of abusing a dominant position
prohibited by the EEA Agreement.472
7.3.2
Color Line’s conduct was capable of restricting competition on the
relevant market
560. Under the factual circumstance in the present case, as set out in detail above, the
arrangement contracted in the harbour agreement between Color Line and the
Municipality of Strömstad reserved to Color Line exclusive harbour access in
Strömstad harbour. It explicitly prevented the Municipality from granting access
to Torskholmen to any “competing ferry activities”, that is, to any potential
future competitors of Color Line. That arrangement extended the legal
exclusivity (initially four years) already existing under the initial 1989
agreement by a period of 15 years (from 1 January 1991 until 30 December
2005), with a right for Color Line to have the exclusivity arrangement even
further extended thereafter by an additional 10 years, that is, from 31 December
2005 until 30 December 2015 (see section 3.3 above).
561. In entering into that arrangement, Color Line effectively reserved to itself
exclusive rights of access to all available capacity at Torksholmen in Strömstad
harbour for a very long period of time and independent of Color Line’s actual or
future capacity needs in Strömstad harbour at that time.
562. At the same time, as demonstrated in detail in Section 5.4.5 above, during the
period under examination there was a lack of genuine harbour alternatives along
the Swedish coastline that potential new entrants could have made use of in
order to enter the relevant market and compete with Color Line.
563. Consequently, the long-term exclusive reservation of the entire capacity of
Torksholmen in Strömstad harbour resulting from its long-term harbour
agreement with the Municipality of Strömstad enabled Color Line to prevent
other ferry companies from gaining access to Torskholmen and, thereby, to
shield its ferry services on the relevant market (as defined in section 4 above)
from competition for a very long period of time.
471
Case 6/72 Europemballage Corporation and Continental Can Company Inc. v Commission [1973]
ECR 215, paragraph 26; Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461, paragraph
125; Case C-95/04 P British Airways plc v Commission [2007] ECR I-2331, paragraph 106.
472
Case C-95/04 P British Airways plc v Commission [2007] ECR I-2331, paragraph 57; Case 6/72
Europemballage and Continental Can v Commission [1973] ECR 215, paragraph 26; Joined Cases C395/96 P and C-396/96 P Compagnie Maritime Belge Transports SA and Others v Commission [2000]
ECR I-1365, paragraph 112.
129
564. This contractual exclusivity thus resulted in the creation, by Color Line, the
monopolist on the relevant market, of a significant additional barrier to entry on
a market already characterised by significant entry barriers (Section 5.4.3). In
addition, as also described above (Section 5.4.4), Color Line took active steps to
enforce its long-term exclusive rights.
565. In the absence of the distortions resulting from Color Line’s long-term
exclusivity under the harbour agreement, the likelihood that the relevant market
for passenger ferry services with tax-free sales (as defined above) would have
witnessed competition between ferry companies would have increased.
566. In the light of the above considerations, Color Line’s long-term exclusive
harbour access arrangements at the very least tended to restrict competition and
were capable of having restrictive effects on the relevant market within the
meaning of Article 54 EEA, by foreclosing potential new entrants from the
market.
567. In addition, and although not required to do so under the case law in order to
establish an abuse of a dominant market position within the meaning of Article
54 EEA,473 the Authority has demonstrated in great detail in the present case the
negative impact that Color Line’s exclusive harbour access arrangements in
Torksholmen in Strömstad harbour had on potential competition. The exclusive
access contracted between Color Line and the Municipality of Strömstad
prevented potential competitors from accessing the relevant market, and so
effectively foreclosed that market to new entrants (see above, Section 5.4).
568. Similarly, while Article 54 EEA does not require the Authority to examine
specifically whether the conduct of the dominant undertaking has caused
prejudice to consumers,474 new entry would almost certainly have led to positive
effects on the relevant market in terms of price, quality and variety of services
to the benefit of consumers (Section 5.4 above).
7.3.3
Color Line’s submissions regarding the finding of abuse
569. Color Line claims that “input exclusivity” can only constitute a restriction of
competition if the input concerned represents a bottleneck or a scarcity and that
the exclusive reservation of capacity is not treated as a formal infringement, but
must be subjected to a concrete effects assessment before any abuse can be
found under Article 54 EEA. It also argues that there is no case law where an
agreement entered into by a non-dominant company is subsequently considered
abusive.475
473
Case T-219/99 British Airways plc v Commission [2003] ECR II-5917, paragraph 293 (upheld on
appeal in Case C-95/04 P British Airways plc v Commission [2007] ECR I-2331).
474
Case C-95/04 P British Airways plc v Commission [2007] ECR I-2331, paragraph 107.
475
Event # 553056, Color Line’s Reply to SO, paragraphs 997-1010. Color Line refers, inter alia, to
the Commission’s Guidance on the Commission’s enforcement priorities in applying Article 82 of the
EC Treaty to abusive exclusionary conduct by dominant undertakings [2009] OJ C 45/7, points 20 and
35.
130
570. Color Line claims that in the SO the Authority failed to conduct an independent
analysis of whether there was an abuse, but simply recycled its Article 53
analysis. That approach, it claims, is contrary to the case law. It cannot be
presumed that an agreement that falls within the scope of Article 53 must
automatically be considered an abuse of a dominant position.476
571. Color Line argues that where the establishment of abuse depends on the
establishment of anti-competitive effects through foreclosure of competitors, in
an ex post perspective it must be substantiated that the conduct actually had
such an effect. Color Line appears to argue that the potential effect must be
concretised when an analysis of the alleged abusive conduct is made ex post.
572. Color Line argues that the Authority fails to take into consideration the special
nature of the harbour agreement, which is in the form of a ground lease. It
claims that the exclusive right to an (upstream) lease object must be considered
as an inherent part of a lease agreement – subject to special regulation in this
case under the Swedish Land Code – and, therefore, that the Authority must
specifically provide reasons for why the characteristics of the relevant market
would nonetheless indicate that such an agreement should be considered an
abuse of a dominant position. It argues that both the distinctive nature of the
harbour agreement and the particular commercial circumstances indicate that
Color Line did not depart from normal competition in the market.477
573. Color Line also claims that the Authority has not established any relevant anticompetitive effects. The fact that alternative harbours are poorer or entail higher
costs cannot mean that competition is foreclosed; the limit must be drawn at
major disadvantages that have a prohibitive effect on entry on the market, in the
sense that it is not profitable to build up the infrastructure for a service that
corresponds to Color Line’s own.478
574. Further, until the rules were changed on 1 June 2002, Color Line argues, the
requirement for a tax-free permit and the systematic refusal by the Norwegian
authorities of applications from other companies constituted an absolute entry
barrier.
575. Finally, Color Line claims, the Authority has not specified any actions that may
be considered an abuse, beyond a reference to the harbour agreement.479
7.3.4
Assessment of Color Line’s submissions regarding the finding of abuse
576. None of Color Line’s arguments call into question the Authority’s finding that
Color Line abused its dominant market position.
476
477
478
479
131
577. As regards first, Color Line’s contention that the Authority, in its SO, merely
recycled its assessment under Article 53 EEA for the purposes of appraising
Color Line’s conduct under Article 54 EEA, the Authority notes that it based its
relevant findings concerning Color Line’s abuse on case-specific findings of
fact and law which demonstrate that all of the relevant criteria in Article 54 are
fulfilled in this case.
578. As is demonstrated in the present Decision, as well as in the SO (section 6), the
Authority defines the relevant market, establishes that Color Line had a
dominant position on that market during the relevant period, and finds Color
Line’s conduct, in its relevant legal and economic context, to have been abusive
within the meaning of Article 54 EEA. In particular, the Authority finds, on the
basis of its in-depth examination, that, in the circumstances of this case, the
long-term exclusive harbour agreement tended to restrict competition and was
capable of having restrictive effects on the relevant market and, consequently,
amounted to an infringement under Article 54 EEA from 1 January 1994.
579. Moreover, Color Line has not demonstrated how the case law it relies on in
support of its “recycling of arguments” claim supports that claim in the
circumstances of the present case.480 Accordingly, the assertion remains
unsubstantiated both as regards the present proceedings and in the light of the
relevant case law. 481
580. Secondly, Color Line’s contentions that, (i) the Authority has not established
any relevant anti-competitive effects; and (ii) where an abuse depends on the
establishment of anti-competitive effects through foreclosure of competitors, in
an ex post perspective it must be shown that the conduct had such an effect,
cannot be accepted. For the purposes of establishing an infringement of Article
54 EEA it is sufficient under the existing case law to show that the conduct of
the undertaking in a dominant position tends to restrict competition or, in other
words, that the conduct is capable of having or liable to have that effect.482
480
It is true that in the Flat Glass judgment that Color Line cites (Joined Cases T-68, 77 and 78/89 SIV
and Others v Commission [1992] ECR II-1403, paragraph 360), the then EU Court of First Instance
held that the European Commission had “recycled” the facts constituting an infringement of then
Article 85 EC and had based a finding of abuse of dominance on that basis, without carrying out any
market survey to show that the parties in that case jointly held a substantial share of the market, that by
virtue of that fact alone they held a collective dominant position, and that their unlawful behaviour
constituted an abuse of that position. However, as demonstrated, no such flaw is present in the present
investigation.
481
Indeed, in Van den Bergh Foods (Case T-65/98 Van den Bergh Foods [2003] ECR II-4653,
paragraph 162), the then Court of First Instance rejected a similar complaint that the Commission had
simply “recycled” facts constituting an infringement of Article 101(1) TFEU in order to find that the
conduct in question also infringed Article 102 TFEU. The Court held that: “the Commission analysed
the relevant market at length in the contested decision and concluded that HB had a dominant position
on that market. The Commission then correctly concluded that by inducing retailers to obtain supplies
exclusively from HB under the conditions referred to in paragraphs 159 and 160 above, HB had
recourse to methods different from those which condition normal competition in consumer products”;
see also Case T-155/06 Tomra and Others v Commission, judgment of 9 September 2010, not yet
published, paragraphs 217-218 (under appeal in Case C-549/10 P).
482
See paragraph 554 above and the case law cited therein.
132
581. In any event, the Authority has shown in the present Decision that Color Line’s
long-term exclusive reservation of harbour access at Torksholmen in Strömstad
had the effect of foreclosing potential competitors and therefore that it had
restrictive effects. The Authority has carried out an in-depth analysis of possible
alternative harbours, and reached the conclusion, after taking due account of
Color Line’s arguments, that none of the possible alternatives constituted
genuine harbour alternatives for new entry within a reasonable time frame for a
potential new entrant seeking to penetrate the relevant market and compete with
Color Line (see above, Section 5.4.5).483
582. As regards Color Line’s claim that the Authority fails to take into consideration
the special nature of the harbour agreement, the Authority notes that clause 7 of
the harbour agreement specifically targets competing ferry activities (paragraph
43 above) with a view to ensuring Color Line exclusive harbour access in
Torskholmen. Color Line has pointed to the inherent nature of the exclusivity in
its harbour agreement, which is in the form of a ground lease, but it has not
argued that it was compelled to enter into long-term exclusivity by any
obligation under Swedish law. In any event, the formal classification of an
agreement under national law cannot be decisive for the classification of an
agreement as abusive under Article 54 EEA. Furthermore, while the conclusion
of lease agreements may in most circumstances form part of normal business
conduct, Color Line has not shown that that is the case as regards the
reservation, by a monopolist, of all capacity in a public harbour like
Torksholmen in Strömstad. That strategically located harbour was the only
public harbour on a long stretch of the Swedish coastline (see Section 5.4.5
above).
583. In relation to Color Line’s arguments regarding the tax-free regime, it suffices
to refer to Section 5.4.8 above, which applies mutatis mutandis to Article 54.
584. As regards Color Line’s argument to the effect that the Authority has not
specified any actions that may be considered an abuse beyond a reference to the
harbour agreement, it is recalled that the Authority, in the present case, does not
take issue with Color Line’s use of the Torksholmen harbour facilities in
Strömstad as such, or with the fact that Color Line and the Municipality of
Strömstad entered into a contractual agreement to that end. What the Authority
takes issue with is the fact that Color Line reserved to itself in the harbour
agreement, a right of exclusive access of up to 25 years to the entire capacity in
that harbour. As has been demonstrated above, it is that conduct, and the
resulting foreclosure of potential competition on the relevant market, which
constituted an abuse of Color Line’s dominant position as from the entry into
force of the EEA Agreement (and its competition rules) in Norway and Sweden
on 1 January 1994.
483
The Authority also recalls that the General Court held in Tomra that foreclosure by a dominant
undertaking of a substantial part of the market could not be justified by showing that the contestable
part of the market was still sufficient to accommodate a limited number of competitors: Case T-155/06
Tomra and Others v Commission, judgment of 9 September 2010, not yet published (under appeal in
Case C-549/10 P), paragraph 241.
133
585. Indeed, from 1 January 1994, Color Line, as a dominant undertaking, had a
special responsibility not to allow its conduct to impair genuine undistorted
competition in the internal market. That responsibility must also apply to
conduct which was commenced or engaged in prior to the entry into force of the
EEA Agreement but which produced or continued to produce anti-competitive
effects thereafter.484 Therefore, and contrary to Color Line’s claims, long-term
exclusive agreements such as that at issue in the present case, which, in their
legal and economic context, entail, and are capable of bringing about, anticompetitive effects, do not escape the prohibition on abuse of dominant market
positions laid down in Article 54 EEA merely because the abusive conduct at
issue in a specific case began prior to the entry into force of the EEA
Agreement. Indeed, an interpretation of Article 54 EEA such as advocated by
Color Line would deprive Article 54 EEA of its practical effectiveness.
7.3.5
Conclusion
586. The Authority concludes that Color Line has abused its dominant position
within the meaning of Article 54 EEA unless it is able to show that there is an
objective justification for the conduct at issue.
7.3.6
Objective justification
587. Exclusionary conduct can fall outside the prohibition of Article 54 EEA if the
dominant company can demonstrate that its conduct is objectively necessary or
produces efficiencies which outweigh the negative effect on competition.485
588. The dominant undertaking has the burden of proving such objective necessity or
efficiency defence. Thus, it is for the dominant undertaking concerned, and not
for the Authority before the end of the administrative procedure, to raise a plea
of objective justification and to support it with arguments and evidence. It then
falls to the Authority, where it proposes to make a finding of an abuse of a
dominant position, to show that the arguments and evidence relied on by the
undertaking cannot prevail and, accordingly, that the justification put forward
cannot be accepted.486
484
Indeed, from 1 January 1994 undertakings had the possibility of notifying agreements concluded
prior to that date for negative clearance. Thus, Article 2 of Chapter II of Protocol 4 SCA, in its original
version, stated that: “upon application […] the EFTA Surveillance Authority may certify that […] there
are no grounds under Article 53(1) or Article 54 of the EEA Agreement for action on its part in respect
of an agreement, decision or practice”. Under Article 15(5) of Chapter II of Protocol 4 SCA, immunity
against fines was granted “in respect of acts taking place after notification” provided they fell “within
the limits of the activity described in the notification”.
485
Case 27/76 United Brands v Commission [1978] ECR 207, paragraph 184; Case T-83/91 Tetra Pak
v Commission (Tetra Pak II) [1994] ECR II-755, paragraph 136; Case C-95/04 P British Airways v
Commission [2007] ECR I-2331, paragraphs 69 and 86.
486
Case T-201/04 Microsoft v Commission [2007] ECR II-3601, paragraph 688.
134
589. If the exclusionary effect of Color Line’s conduct bears no relation to
advantages for the market and consumers, or if it goes beyond what is necessary
in order to attain such advantages, that conduct must be regarded as an abuse.487
590. Color Line argues that its long-term exclusivity was objectively justified on the
basis of efficiencies that resulted therefrom. It argues that the harbour agreement
led to a substantial improvement in the services offered and that its long-term
exclusive rights were necessary in order to secure stable, predictable and
flexible harbour access and to allow it to make the investments in tonnage,
facilities and marketing that made those developments and improvements
possible. Color Line also argues that consumers have benefited considerably
through a high frequency, high quality service, greatly improved since 1991, as
evidenced by passenger growth since that time.488
591. The Authority notes first that it is unlikely that abusive conduct of a dominant
company with a market position approaching that of monopoly – as here – can
be justified on the ground that efficiency gains would be sufficient to counteract
its actual or likely anti-competitive effects.489
592. Secondly, Color Line’s arguments in relation to possible objective justification
are essentially the same arguments it puts forward in relation to Article 53(3).
The Authority has assessed the merit of those arguments in detail in Section 6
above under each of the four conditions in Article 53(3) EEA.
593. In particular, the Authority has found that any efficiency gains brought about by
the long-term exclusive harbour agreement have either been insufficiently
substantiated or were, at best, limited in nature, and that Color Line has failed to
show that the benefits of any efficiencies that can be said to have been brought
about by its harbour agreement outweighed the harm to consumers resulting
from its long-term exclusivity.
594. Even if improvements have been made in the harbour and in the service on the
route, as referred to in Section 6 above, Color Line’s arguments are tantamount
to claiming that it was entitled to reserve all capacity in the harbour for itself
during a considerable period of time, and thereby exclude potential competition,
so as to ensure that it could develop its service in the future. The commercial
circumstances Color Line claims justified long-term exclusivity appear to be the
company’s need for flexible, but stable and uninterrupted access to harbour
facilities.490 While it might be possible in certain circumstances to justify long-
487
Case C-95/04 P British Airways v Commission [2007] ECR I-2331, paragraph 86.
488
489
See the Authority’s Guidelines on the application of Article 53(3) EEA, paragraph 92; and the
490
135
term exclusivity in order to safeguard certain interests/ initial sunk investments,
exclusivity must be directly linked to those interests/investments.491
595. Color Line has not demonstrated any causal link between the long-term
exclusive harbour agreement and the claimed improvements or enhancements,
or shown that the agreement, which excluded competition, was objectively
necessary for and proportionate to achieving economic benefits. Color Line
simply asserts that long-term future capacity in the harbour was necessary in
order to develop its ferry service but has not provided any evidence of planned
expansion at the time of the agreement. Further, the Authority considers that
Color Line could have ensured itself harbour access in Sweden by less
restrictive means.
596. With regard to Color Line’s investments, the Authority has concluded in
Section 6 above, on the basis of the available evidence, that the investments
Color Line made in the harbours were at best very limited and in any event
insufficient to justify the long-term exclusivity; that Color Line’s investments in
tonnage on the route were only to a limited degree sunk; and that Color Line’s
specific marketing costs on the route could not justify the long-term exclusivity.
597. Since the arguments relied on by Color Line do not fulfil the criteria in Article
53(3) EEA they cannot amount to objective justification under Article 54 EEA.
598. In the light of these considerations, Color Line’s plea of objective justification
and the arguments and evidence it relies on cannot prevail. The Authority
therefore concludes that Color Line has failed to show that the long-term
exclusivity in its harbour agreement, which resulted in foreclosure of
competition in the relevant market, was objectively justified.
7.3.7
Conclusion on the abuse assessment
599. In the light of the above, the Authority concludes that after the entry into force
of the EEA Agreement the exclusive rights enjoyed by Color Line pursuant to
the 1991 harbour agreement to use the harbour facilities at Torskholmen in
Strömstad for a period of 25 (15 plus 10) years were, at the very least, capable
of restricting competition. By maintaining those rights in force from 1 January
1994 until 21 December 2005 Color Line therefore abused its dominant position
within the meaning of Article 54 EEA.
7.4
Effect on trade between Contracting Parties
600. Article 54 EEA prohibits the abuse of a dominant position within the territory
covered by the EEA Agreement or in a substantial part of it insofar as it may
affect trade between Contracting Parties. As has been demonstrated in
paragraphs 451 to 453 above, international ferry services are by their very
nature cross-border, and the relevant market for ferry services in this case forms
a substantial part of the common market.
491
Guidelines on the application of Article 53(3) EEA, paragraphs 44 and 80; Guidelines on Vertical
Restraints, paragraphs 123 and 202.
136
601. In that light, Color Line’s abuse of its dominant position on the relevant market
was capable of appreciably affecting intra-EEA trade within the meaning of
Article 54 EEA.
7.5
Conclusion on Article 54 EEA
602. In the light of the foregoing, the Authority concludes that from 1 January 1994
until 20 December 2005 Color Line abused its dominant position on the relevant
market within the meaning of Article 54 EEA.
8
DURATION OF THE INFRINGEMENT
603. In establishing the duration of the infringement of Articles 53 and 54 EEA, the
Authority notes that the harbour agreement at issue was entered into in 1991.
The Authority considers that the infringement commenced at the date of entry
into force of the EEA Agreement, that is, on 1 January 1994. In maintaining the
agreement from that time onwards, Color Line infringed both Articles 53 and 54
EEA.492
604. The Municipality of Strömstad declared on 21 December 2005 that it would no
longer grant Color Line exclusive access, and Kystlink was allowed to establish
itself in Strömstad harbour from November 2006 (see paragraph 47). Thus, at
least until 20 December 2005, the harbour agreement excluded all potential
competitors from access to Torskholmen.
605. Color Line has argued, regarding the duration of the infringement, that the
rejection by the Norwegian authorities of all applications for tax-free licences
other than Color Line’s prior to 1 June 2002 prevented entry into the relevant
market, and, therefore, that there could be no infringement before that date in
any event.493
606. However, the Authority has rejected Color Line’s arguments to the effect that
the tax-free legislation created a legal framework which eliminated any
possibility of competitive activity on the relevant market prior to 1 June 2002
such that Color Line is exonerated from liability under the EEA competition
rules (see Section 5.4.8 above). Color Line’s arguments regarding the duration
of the infringement must, therefore, also be rejected.
9
CONCLUSION ON THE INFRINGEMENT OF ARTICLES 53 AND 54
EEA
607. The Authority concludes that from 1 January 1994 to 20 December 2005 the
long-term exclusive rights enjoyed by Color Line pursuant to the 1991 harbour
agreement to use the harbour facilities at Torskholmen in Strömstad had the
effect of preventing, restricting or distorting competition within the meaning of
Article 53(1) EEA. The Authority further concludes that Color Line has not
shown that the conditions laid down in Article 53(3) EEA are satisfied.
492
See Article 12 of Protocol 21 to the EEA Agreement.
493
137
608. The Authority also concludes that from 1 January 1994 to 20 December 2005
the long-term exclusive rights enjoyed by Color Line pursuant to the 1991
harbour agreement to use the harbour facilities at Torskholmen in Strömstad
were, at the very least, capable of restricting competition. The Authority further
concludes that Color Line has not shown that there was any objective
justification for maintaining its exclusive rights in force from 1 January 1994
until 20 December 2005, and that Color Line therefore abused its dominant
position on the relevant market within the meaning of Article 54 EEA.
609. Therefore, Color Line’s conduct constituted an infringement of Articles 53 and
54 EEA.
10
LIABILITY FOR THE INFRINGEMENT AND ADDRESSEES OF THE
DECISION
610. The subjects of the EEA competition rules are undertakings, a concept which is
not identical to that of corporate legal personality for the purposes of national
commercial or fiscal law. The undertaking that participated in the infringement
is therefore not necessarily identical to the precise legal entity within the group
of companies whose representatives actually took part in the infringement. The
term “undertaking” may refer to any entity engaged in commercial activities.
The case law has confirmed that Articles 53 and 54 of the EEA Agreement are
aimed at economic units which consist of a unitary organisation of personal,
tangible and intangible elements which pursue a specific economic aim on a
long-term basis and can contribute to the commission of an infringement of the
kind referred to in those provisions.494
611. Firstly, it falls, in principle, to the natural or legal person managing the
undertaking in question when the infringement was committed to answer for
that infringement.495 Thus, when an undertaking that has committed an
infringement of the competition rules of the EEA Agreement subsequently
disposes of the assets which contributed to the infringement and withdraws from
the market in question, it continues to be answerable for the infringement if it
has not ceased to exist.496 Liability for illegal behaviour may pass to a successor
where the corporate entity which committed the infringement has ceased to
exist. If the legal person initially answerable for the infringement ceases to exist
and loses its legal personality, being purely and simply absorbed by another
legal entity, that latter entity must be held answerable for the whole period of
the infringement and thus is liable for the activity of the entity that was
absorbed.497
494
See Case T-11/89 Shell International Chemical Company Ltd v Commission [1992] ECR II-757,
paragraph 311; and Case T-352/94 Mo Och Domsjö AB v Commission [1998] ECR II-1989, paragraphs
87-96.
495
See Case C-279/98 P Cascades v Commission [2000] ECR I-9693, paragraph 78.
496
Case T-6/89 Enichem Anic v Commission (Polypropylene) [1991] ECR II-1623; Case C-49/92 P
Commission v Anic Partecipazioni SpA [1999] ECR I-4125, paragraph 81.
497
See Case C-279/98 P Cascades v Commission [2000] ECR I-9693, paragraphs 78 and 79: “It falls,
in principle, to the natural or legal person managing the undertaking in question when the
138
612. In the case at hand, the company Scandi Line AS, incorporated under
Norwegian law, operated the Sandefjord to Strömstad route and relied on the
long-term exclusive agreement during the period from 1991 to 2000 (under the
name of Color Scandi Line AS from 30 September 1998 (paragraphs 20 to 31
above). In 2000, Color Scandi Line AS was absorbed by Color Line AS. In
2007, Color Line AS transferred operation of the route to a newly established
subsidiary, Color Line Transport AS (paragraph 32 above). Thus, the legal
entity that operated the ferry route from Sandefjord to Strömstad and that relied
on the long-term exclusivity remained the same from 1991 to 2005. Its current
name is Color Line AS. Although Color Line AS has now divested operation of
the route to its wholly-owned subsidiary Color Line Transport AS, it continues
nevertheless to be liable for the infringement for the relevant period.498
Therefore, this Decision is addressed to Color Line AS, in its capacity as the
legal entity that directly participated in the infringement addressed by this
Decision for the period from 1 January 1994 to 20 December 2005.
613. Secondly, the anti-competitive conduct of an undertaking can be attributed to
another undertaking where the undertaking directly participating in the
infringement has not decided independently upon its own conduct on the
market, but carried out, in all material respects, the instructions given to it by
that other undertaking having regard in particular to the economic links between
them.499 In the case of wholly-owned (or almost wholly-owned) subsidiaries,
the infringement committed by a wholly-owned subsidiary is also attributable to
the parent company, as the parent company is presumed to have exercised
decisive influence over its wholly-owned subsidiary.500 However, the parent
company and/or subsidiary may rebut this presumption by producing sufficient
evidence that shows that the subsidiary decided independently on its own
conduct on the market.501
614. Color Line AS has been part of Color Group AS since 30 September 1998.
Color Group AS (previously Color Line ASA) is the parent company of Color
Line AS, and has wholly owned (100%) Color Line AS since 30 September
1998. In those circumstances, there is a presumption that Color Group AS
infringement was committed to answer for that infringement, even if, when the Decision finding the
infringement was adopted, another person had assumed responsibility for operating the undertaking ...
Moreover, those companies were not purely and simply absorbed by the appellant but continued their
activities as its subsidiaries. They must, therefore, answer themselves for their unlawful activity prior
to their acquisition by the appellant, which cannot be held responsible for it”; and Joined Cases T259/02 to T-264/02 and T-271/02 Lombard Club [2006] ECR II-5169, paragraphs 319-336.
498
Case C-204/00 Aalborg Portland v Commission [2004] ECR I-123, paragraphs 355-358.
499
Case C-294/98 P Metsä-Serla Oyj [2000] ECR I-10065, paragraph 27; Case 107/82 AEG v
Commission [1983] ECR 3151, paragraph 49; and Case 48/69 Imperial Chemical Industries [1972]
ECR 619, paragraphs 132-133.
500
Joined Cases T-71/03, T-74/03, T-87/03 and T-91/03 Tokai Carbon a.o. v Commission [2005] ECR
II-10, paragraph 60; Case T-354/94 Stora Kopparbergs Bergslags v Commission [1998] ECR II-2111,
paragraph 80, upheld by the ECJ in Case C-286/98 P Stora Kopparbergs Bergslags v Commission
[2000] ECR I-9925, paragraphs 27-29; and Case 107/82 AEG v Commission [1983] ECR 3l5l,
paragraph 50.
501
Case C-97/08 P AKZO v Commission [2009] ECR I-8237, paragraphs 58-60.
139
exercised decisive influence over the commercial policy of Color Line AS, its
wholly owned subsidiary, from 30 September 1998 until at least 20 December
2005. As Color Line has not rebutted that presumption by adducing any
evidence to show that Color Line AS acted on the market independently of
Color Group AS, the Authority holds Color Group AS liable for the
infringement of Articles 53 and 54 EEA identified in this Decision from 1
October 1998 until 20 December 2005.
615. This Decision is not addressed to the Municipality of Strömstad. The Authority
has the discretion to decide not to bring proceedings against all undertakings
that may have been involved in an infringement of the EEA competition
rules.502 In the present case, the restrictive clauses were effectively imposed by
Color Line or, at the very least, included in the agreement on its initiative (see
paragraph 144 above). Those clauses were essentially to Color Line’s benefit,
reserving it exclusive rights of access to all capacity at Torskholmen for 25 (15
plus 10) years, thereby strengthening its position in the relevant market in which
it provided its ferry services, in which it enjoyed significant earnings, and in
which the clauses produced their restrictive effects. Maintaining those exclusive
rights in force amounted to abusive conduct within the meaning of Article 54
EEA. The evidence shows that the Municipality of Strömstad attempted to
remove the long-term exclusivity provision from the harbour agreement during
negotiations in 2000/2001, and that Color Line refused (see paragraphs 377380).503 Further, it was the Municipality which, despite substantial pressure
from Color Line, decided in December 2005 to grant Kystlink access to
Torskholmen (see paragraphs 186-187 and Section 5.4.7.3 above). In those
circumstances, the Authority has decided not to pursue the infringement of
Article 53 EEA against the Municipality of Strömstad.
616. On the basis of the above, this Decision is addressed to:

Color Line AS from 1 January 1994 until 20 December 2005 by virtue of its
direct participation in the infringement.

Color Group AS from 1 October 1998 until 20 December 2005 as a result of
its decisive influence over its wholly-owned subsidiary Color Line AS.
617. Each of those companies will be held jointly and severally liable for the
infringement insofar as those periods of infringement overlap.504
502
Decision 2004/138/EC, Austrian Banks, OJ L 56 p.1, paragraph 472, upheld by the European Court
of First Instance in Joined Cases T-259-264 and 271/02 Raiffeisen Zentralbank Österreich and Others
v Commission ECR [2006] II-5169, paragraphs 134-147 (not appealed on this point).
503
Event 401822, correspondence between Color Line and the Municipality of Strömstad from 20002001 regarding harbour fees and possible amendments to the agreement. Of particular relevance is the
letter from Color Line dated 10 April 2001 (p. 76).
504
Case C-97/08 P AKZO v Commission [2009] ECR I-8237, paragraph 61.
140
11
REMEDIES AND FINES
11.1 Article 7 of Chapter II of Protocol 4 to the Surveillance and Court
Agreement
618. Where the Authority finds that there is an infringement of Articles 53 and/or 54
EEA it may by decision require the undertakings concerned to bring such
infringement to an end in accordance with Article 7(1) of Chapter II of Protocol
4 to the Surveillance and Court Agreement and to impose any remedy which is
proportionate to the infringement committed and necessary to bring the
infringement effectively to an end.
619. Pursuant to Article 7(1) of Chapter II of Protocol 4 to the Surveillance and
Court Agreement, if the Authority has a legitimate interest in doing so, it may
also find that an infringement has been committed in the past.
620. This Decision finds that Color Line has committed an infringement of Articles
53 and 54 EEA for the period from 1 January 1994 until 20 December 2005.
While the Authority considers, on the basis on the available evidence, that the
infringement ceased on 20 December 2005, for the avoidance of doubt, the
undertakings which remain active in the relevant market and to which this
Decision is addressed should be required to bring the infringement to an end, if
they have not already done so, and henceforth to refrain from any act or conduct
which might have the same or similar object or effect.
621. The Authority also considers that it is necessary to adopt a decision for the
following reasons.

Color Line continues to deny that its behaviour was contrary to Articles
53(1) and 54 EEA.

Color Line was able to remain as the sole operator on the relevant market
and on a number of occasions took action to deter new entry so as to ensure
that that remained the case.

The long-term exclusive harbour agreement prevented other ferry operators
from gaining access to Torskholmen and thereby foreclosed the relevant
market for a substantial period of time.

Without the restriction on potential competition, it is likely that the market
would have delivered greater benefits to consumers as a whole, such as
increased choice and innovation, and lower prices.

It is important for the proper functioning of the single market that anticompetitive practices committed by market players are not tolerated.
622. As explained in Section 11.2 below, the Authority has the power to impose fines
and has decided to do so in the present case. It is established case law that the
express power to impose fines necessarily entails a power to find an
141
infringement,505 and that the Authority’s power to impose fines is in no way
affected by the fact that the Authority considers that the conduct constituting the
infringement has ceased.506
11.2 Article 23(2) of Chapter II of Protocol 4 to the Surveillance and Court
Agreement
623. Under Article 15(2) of the previous Chapter II of Protocol 4 to the Surveillance
and Court Agreement and under Article 23(2) of Chapter II of Protocol 4 as it
now stands,507 the Authority may by decision impose fines on undertakings
which, either intentionally or negligently, infringe Articles 53 and/or 54 EEA.
Any fine imposed shall not exceed 10% of the undertaking’s total turnover in
the preceding business year.
624. The ECJ has ruled that it is not necessary for an undertaking to have been aware
that it was infringing the rules of competition laid down in the TFEU for an
infringement to be regarded as having been committed intentionally. It is
sufficient that it could not have been unaware that the contested conduct had as
its object or effect the restriction of competition.508 The same applies with
regard to the competition rules of the EEA Agreement.
625. In the present case, the Authority considers that, based on the facts described in
this Decision and the assessment set out above, the addressees of this Decision
could not have been unaware that the harbour agreement had as its effect the
restriction of competition.509 It is recalled that Color Line was able to remain the
sole operator on the relevant market throughout the period under examination,
and on several occasions took action to ensure that that remained the case. As a
result, the addressees of this Decision must be regarded as having intentionally,
or at least negligently, committed the infringement of Articles 53 and 54 EEA
established in this Decision.
626. In fixing the amount of the fine, pursuant to Article 23(3) of Chapter II of
Protocol 4 to the Surveillance and Court Agreement the Authority must have
regard to all relevant circumstances and in particular to the gravity and duration
of the infringement. In setting the fines to be imposed, the Authority will refer
505
Case 7/82 GVL v Commission [1983] ECR 483, paragraph 23; Joined Cases T-22/02 etc. Sumitomo
Chemicals Co. Ltd. and others v Commission [2005] ECR 4065, paragraph 36.
506
Case 41/69 ACF Chemiefarma NV v Commission [1970] ECR 661, paragraph 175; Joined Cases T22/02 etc. Sumitomo Chemicals Co. Ltd. and others v Commission [2005] ECR 4065, paragraph 37.
507
The previous version of Chapter II of Protocol 4 to the Surveillance and Court Agreement was
replaced by a new version through an Agreement of 24 September 2004 between the EFTA States
amending Protocol 4 to the Surveillance and Court Agreement following the incorporation of
Regulation (EC) No 1/2003 into the EEA Agreement (see Article 3(1)(3) of Protocol 21 to the EEA
Agreement). The Agreement of 24 September 2004 between the EFTA States entered into force on 20
May 2005.
508
Case 246/86 Belasco and others v Commission [1989] ECR 2117, paragraph 41; Case C-279/87
Tippex v Commission [1990] ECR I-261, paragraph 165; and Case T-59/99 Ventouris Group
Enterprises SA v Commission [2003] ECR II-5257, paragraph 54.
509
Case T-59/99 Ventouris Group Enterprises SA v Commission [2003] ECR II-5257, paragraph 54.
142
to the principles laid down in its Guidelines on the method of setting fines and
will set the fines at a level sufficient to ensure deterrence.510
627. In the light of the above considerations, and having regard to the circumstances
in the present case, in particular the monopoly position of Color Line
throughout the relevant period and the nature and duration of the infringement,
the Authority concludes that it is necessary to impose a fine on the addressees of
this Decision for the breach of the EEA competition rules which has been
identified.
628. Although the Authority has identified an infringement of the EEA competition
rules from 1 January 1994, in exercising its power to impose fines, the
Authority has decided, exceptionally, under the wide margin of discretion that it
enjoys in setting fines, and in the light of the particularities of the present case,
not to impose a fine for the entire period of the infringement.511
629. In doing so, the Authority, firstly takes into consideration the fact that the
harbour agreement, which was concluded in 1991, had been in force for three
years prior to the entry into force of the EEA Agreement on 1 January 1994.
630. Secondly, the Authority gives some weight, insofar as the first years of the
infringement are concerned, to the fact that the EEA competition rules resulted
in a new competition regime in the EEA EFTA States which was significantly
different from the national competition law regimes applicable in those States at
the time.
631. Thirdly, the Authority takes into account the time that elapsed between the entry
into force of the EEA Agreement and the submission of the complaint in
December 2005 (paragraph 8 above).
632. Fourthly, while there were several applications to obtain a tax-free licence for
envisaged short routes between Norway and Sweden, weight is given to the fact
that, on the basis of the Authority’s investigation, the evidence suggests that the
first major attempts at establishing a competing route comparable to Color
Line’s route occurred several years after 1994 (Bastø-Fosen in 1998/99; LarvikStrømstadlinjen in 2000-2002); and to the fact that by the late 1990s the
turnover on the Sandefjord – Strömstad route had reached very significant
levels.
633. In the light of these considerations, the Authority has decided to exercise its
discretion to impose fines only for the period of the infringement committed
from 1 January 1999 until 20 December 2005.
510
Guidelines on the method of setting fines imposed pursuant to Article 23(2) of Chapter II of
Protocol 4 to the Surveillance and Court Agreement, OJ C 314, 21.12.2006, p. 84 and EEA Supplement
to the OJ No 63, 14.12.2006, p. 44.
511
The Guidelines on the method of setting fines provide that: “Although these Guidelines present the
general methodology for the setting of fines, the particularities of a given case or the need to achieve
deterrence in a particular case may justify departing from such methodology”, paragraph 37. See Case
C-248/98 NV Koninklijke KNP BT v Commission [2000] ECR I-9655, paragraph 45.
143
634. In this case, the addressees of the Decision have committed a simultaneous
infringement of two provisions of the EEA Agreement. The Authority considers
that fines should not be applied cumulatively in respect of the same set of facts
and time period, and, therefore, that a single fine should be imposed. It follows
that no increase in the fine is applied due to the fact that both Articles 53 and 54
EEA have been infringed. In the same way, the fine imposed is not apportioned
between those two Articles but is applied to the infringement of the EEA
competition rules as such.
11.3 The basic amount of the fine
11.3.1
Calculation of the value of sales
635. As a general rule, the basic amount of the fine is to be set at a level up to 30% of
the value of sales in the relevant geographic area within the EEA of the
products/services to which the infringement directly or indirectly relates. The
Authority normally takes the sales made by the undertaking during the last full
business year of its participation in the infringement.512 In this case that is 2004.
636. According to information provided by Color Line, its turnover in 2004 on the
Sandefjord – Strömstad route amounted to NOK 899.683 million.513 That is
equivalent to approximately EUR 107.492 million.514
11.3.2
Determination of the basic amount of the fine
637. The basic amount of the fine is related to a proportion of the value of sales,
depending on the degree of gravity of the infringement, multiplied by the
number of years of the infringement.515
11.3.2.1 Gravity
638. In order to decide whether the proportion of the value of sales to be considered
in a given case should be at the lower end or at the higher end of the scale, the
Authority carries out a case-by-case analysis, taking into account all of the
relevant circumstances of the case. The Authority has regard to a number of
factors, such as the nature of the infringement, the market share of the
undertakings concerned and the geographic scope of the infringement.516 Those
factors are analysed below.
512
Guidelines on the method of setting fines, paragraphs 4-18.
513
Event # 600018, reply from Color Line dated 1 June 2011.
514
The average exchange rate for 2004 was 1 EUR:NOK 8.3697 according to the European Central
Bank’s historical Euro foreign exchange reference rates.
515
Guidelines on the method of setting fines, paragraph 19.
516
Guidelines on the method of setting fines, paragraphs 12 and 14.
144
11.3.2.1.1 Nature of the infringement
639. In its assessment of the gravity of the infringement in this case, the Authority
takes into account, in particular, the following factors.

In a market already characterised by high barriers to entry, the harbour
agreement excluded the possibility for other companies to operate ferry
services from the port of Torskholmen in Strömstad and thereby foreclosed
the relevant market for a substantial period of time (see Sections 5.4.2 and
7.3 above).

Color Line’s conduct allowed it to maintain a monopoly position on the
relevant market during the relevant period (see Sections 5.4.2 and 7.3
above).

After 1 January 1999, Color Line took action to deter new entry (see Section
5.4.4 above).

Color Line enjoyed significant earnings on the route (see Section 3.4.4
above) which, under normal conditions, is likely to have attracted new entry.
11.3.2.1.2 Market share
640. Color Line was in a monopoly position on the relevant market for the entire
duration of the infringement, it was an unavoidable trading partner for all
passengers wishing to travel between Sandefjord and Strömstad, and it did not
face any competition at all during the period under examination.
11.3.2.1.3 Geographical scope of the infringement
641. The Authority takes into account the fact that the 1991 harbour agreement
applied to ferry services which were cross-border in nature and affected
competition on a route between two EEA States, thereby distorting competition
in the internal market.
642. On the other hand, the Authority also takes account of the fact that the
infringement only affected a single route and did not extend to other routes
operated by Color Line to and from Norway.
11.3.2.1.4 Conclusion on gravity
643. In conclusion, having regard to all of the factors discussed above and taking into
account the specific circumstances of this case, the Authority considers that the
proportion of the value of sales to be used to establish the basic amount of the
fine should be 2.5%.
11.3.2.2 Duration
644. According to paragraph 24 of the Guidelines on the method of setting fines: “In
order to take fully into account the duration of the participation of each
undertaking in the infringement, the amount determined on the basis of the
value of sales […] will be multiplied by the number of years of participation in
145
the infringement. Periods of less than six months will be counted as half a year;
periods longer than six months but shorter than one year will be counted as a
full year.”
645. Color Line’s infringement commenced on 1 January 1994 and continued until
20 December 2005 – a total of 11 years, 11 months and 20 days.
646. However, as explained above, due to the particularities of the present case, the
Authority has exceptionally decided only to impose fines from 1 January 1999
until 20 December 2005 (six years, 11 months and 20 days).
647. The overall duration of the period taken into account by the Authority for the
calculation of the fine therefore amounts to 7 years.
11.3.3
Conclusion on the basic amount of the fine
648. On the basis of the above, the basic amount of the fine is fixed at EUR 18.811
million.
11.4 Mitigating circumstances
649. According to the Guidelines on the method of setting fines, the basic amount of
the fine may be reduced where the Authority finds that mitigating circumstances
exist, such as the undertaking providing evidence that it has terminated the
infringement as soon as the Authority intervened; the infringement has been
committed as a result of negligence; the undertaking has effectively cooperated
with the Authority outside the scope of the Leniency Notice517 and beyond its
legal obligations to do so; or where the anti-competitive conduct of the
undertaking has been authorised or encouraged by public authorities or
legislation.518
650. The Authority considers that there are no mitigating circumstances in the
present case.
11.5 Aggravating circumstances
651. The basic amount of the fine may be increased where the Authority finds that
there are aggravating circumstances, such as where an undertaking continues or
repeats the same or a similar infringement after the Authority or a national
competition authority has made a finding that the undertaking infringed Articles
53 or 54, or for refusal to cooperate with or obstruction of the Authority in
carrying out its investigations.519
517
Notice on immunity from fines and reduction of fines in cartel cases, OJ C 294, 3.12.2009, p. 7 and
EEA Supplement to the OJ No 64, 3.12.2009, p. 1.
518
Guidelines on the method of setting fines, paragraph 21. The Guidelines list other types of possible
mitigating circumstances but these apply mainly to cartels.
519
Guidelines on the method of setting fines, paragraph 20. The Guidelines list other types of possible
aggravating circumstances but these apply mainly to cartels.
146
652. The Authority considers that there are no aggravating circumstances in this
case.
11.6 Conclusion
653. In view of the considerations above, the final amount of the fine to be imposed
on Color Line is set at EUR 18.811 million.
654. In 2010 the turnover of Color Group AS was NOK 4 508.912 million (EUR
563.311 million).520
655. The fine does not exceed 10% of the total turnover of the undertaking
participating in the infringement in the business year preceding this Decision.
520
Event # 600018, reply from Color Line dated 1 June 2011. Exchange rate 2010, 1 Euro: NOK
8.0043, according to the European Central Bank’s historical Euro foreign exchange reference rates.
147
HAS ADOPTED THIS DECISION:
Article 1
Color Line AS and Color Group AS have infringed Article 53 and Article 54 of the
EEA Agreement through the long-term exclusive rights enjoyed by Color Line AS
pursuant to the harbour agreement contracted with the Municipality of Strömstad in
1991, as follows:
a) Color Line AS, by virtue of its direct participation in the infringement, from 1
January 1994 until 20 December 2005;
b) Color Group AS, as a result of its decisive influence over its wholly-owned
subsidiary Color Line AS, from 1 October 1998 until 20 December 2005.
Article 2
For the infringement referred to in Article 1 for the period from 1 January 1999 to 20
December 2005, a fine of EUR 18.811 million is imposed on Color Line AS and
Color Group AS, for which they are jointly and severally liable.
Article 3
The fine shall be paid into the following bank account within three (3) months of the
date of notification of this Decision:
Account No: 363-0750881-44 of the EFTA Surveillance Authority with:
ING Bank, 23 Rue Champ de Mars, B-1050 Brussels
Code SWIFT: BBRUBEBB
Code IBAN: BE55 3630 7508 8144
After the expiry of that period, interest shall automatically be payable at the interest
rate applied by the European Central Bank to its main refinancing operations on the
first day of the month in which this Decision is adopted plus 3.5 percentage points.
Article 4
The undertakings referred to in Article 1 shall immediately bring to an end the
infringements referred to in that Article, insofar as they have not already done so.
They shall refrain from repeating any act or conduct described in Article 1, and from
any act or conduct in the future which might have the same or equivalent object or
effect.
Article 5
This Decision is addressed to:
Color Line AS
Hjortnes
0250 OSLO
Norway
148
and
Color Group AS
Bryggegata 3
0250 OSLO
Norway
Done at Brussels, 14 December 2011
For the Authority,
Oda Helen Sletnes
President
Sverrir Haukur Gunnlaugsson
College Member
149

Color Line decision - EFTA Surveillance Authority

Transcription

Similar documents

West harbour - Helsinki New Horizons

WEST HARBOUR WEST HARBOUR

Read the full MACO feature here

Cumberland Harbour is a natural paradise.

Karak - Publications

A585 Windy Harbour to Skippool Improvement

Next Generation Public Safety

“Scandinavian Tour”: June 21st 2012 we started with a Seacamper

Newsletter May 2012 - Emsworth Cruising Association

August-September 2013