Brussels, 8 August 2002
Commission clears de-merger of cross-Channel ferry operator P&O Stena Line
The European Commission has approved a transaction by which P&O (UK) will acquire full control of P&O Stena Line, the cross-Channel ferry operator which currently is a joint venture between P&O and Stena Line UK Ltd. The analysis carried out by the Commission indicated that the change to sole control – which constitutes a concentration within the meaning of the Merger Regulation - does not raise any competition concerns. The Commission however remains fully committed to closely follow cross-Channel market developments in contact with consumer organisations and national authorities.
The Peninsular and Oriental Steam Navigation Co (P&O) is a UK listed company involved, inter alia, in maritime shipping and port activities world-wide. In Europe, P&O, apart from its involvement in the P&O Stena Line joint venture, operates passenger and ferry services on the North Sea and the Western Channel. The P&O Stena Line joint venture is the leading ferry operator on the Dover-Calais route, formed in 1998 through a combination of P&O’s and the Stena Line UK Ltd’s interests on the “Short Sea”. That term describes the routes across the Short French Sea (between Dover, Folkstone, Ramsgate Newhaven and Calais, Dieppe, Boulogne and Dunkirk) and the Belgian Straits (Ramsgate and Ostend). P&O will acquire all the remaining shares in P&O Stena Line. The proposed concentration would therefore in effect be a de-merger of P&O’s and Stena’s interests in this area.
The Commission initially granted the creation of the P&O SL joint venture a three-year exemption under Article 81(3) EC which was renewed in 2001 for a further six year period. In last year’s investigation the Commission already stated clearly that it would continue to follow developments in cross-Channel transport services.
In the present case, the Commission concluded that the change in control of P&O Stena Line would not lead to the creation of a dominant position for the provision of freight and passenger services between the Continent and the United Kingdom, regardless of how the market was defined. The Commission also examined whether the possibility to control P&O Stena Line alone would give P&O additional advantages, which could enable it to force competitors out of the market and thereafter raise prices. However, the investigation showed that such a scenario is not likely considering the amount of actual or potential competition on the market and the low barriers to entry. Lastly, the Commission concluded that the market did not show the characteristics which would enable the operators (both the ferry operators and Eurotunnel) to act in parallel to raise prices rather than compete and that the fact that P&O will now be able to control P&O Stena Line alone would not change that structure.
The conclusion reached by the Commission in this specific transaction does however not affect its commitment to monitor market evolution in order to ensure that prices and trade conditions are in accordance with the European Competition rules.
On 26 January 1999, the Commission approved the creation of the P&O Stena Line joint venture under Article 81(3) EC. Due to uncertainties as to the future developments in the market, the approval was however limited to three years.1 In December 2000, the parties applied for a renewal of the exemption until 2020. The application was made under Regulation 4056/86, under which the Commission has 90 days from publication of a summary of the application in the Official Journal of the European Communities to raise serious doubts if there is a need to continue the investigation. If no serious doubts are raised, the agreement is automatically exempted for six years from the date of such publication. The Commission concluded under that investigation that there had been no material changes in the market that would justify denying a further clearance and did not raise serious doubts, with the effect that the P&O Stena Line joint venture was deemed exempted until 7 March 2007.2