Gulf of Naples, Strait of Messina and Sardinia Ferry Fares: The Italian Competition Authority to target ferry cartels or the hot summer of Italian ferry operators

Gulf of Naples, Strait of Messina and Sardinia Ferry Fares: The Italian Competition Authority to target ferry cartels or the hot summer of Italian ferry operators

Apart from the difficult economic conditions affecting the 2013 Summer season, the Italian ferry operators have also to cope with the Italian Competition Authority (ICA) cartel enforcement activities of Italian Competition Authority (ICA). In the space of a few weeks the ICA opened two Article 102 TFEU proceedings in the Gulf of Naples (Autorità Garante del Mercato e della Concorrenza, decision n. 24357 of 30 May 2013, Case I689C, Organizzazione Servizi Marittimi nel Golfo di Napoli http://www.agcm.it/trasp-statistiche/doc_download/3765-24-13.htmland Strait of Messina ((Autorità Garante del Mercato e della Concorrenza, decision n. 24427 of 26 June 2013, Case I763, Servizi di Cabotoggio Marittimo Stretto diMessina) cases on market sharing and price coordination agreements and it found out a price-fixing cartel between in Sardinia Ferry Fares((Autorità Garante del Mercato e della Concorrenza, decision of 11 June 2013, Case I743, Tariffe Traghetti Sardegna (Sardinia Ferries Fares).

In Sardinia Ferry Fares the ICA held that Moby, SNAV, Grandi Navi Veloci (GNV) and Marinvest infringed Article 101 TFEU by entering into a single and complex anticompetitive agreement in the shape of a concerted practice by which they collectively agreed to rise the fares for the 2011 Summer season. The routes affected by the coordinated fare increases were the Civitavecchia-Olbia/Golfo Aranci, Genova-Olbia, Livorno-Olbia/Golfo Aranci and Genova/Porto Torres links.

The ICA observed a parallelism of pricing from the parties. Whereas for the 2006-2010 period the parties competed on prices, since the 2011 Summer season they engaged in significant price increases that were of 42% for the Civitavecchia-Olbia and Genoa-Olbia routes and 50% for the Genoa-Porto Torres route.

The ICA also ruled out that there exist plausible explications alternative to collusion for the pricing policies of the parties. As the demand for ferry links was elastic and then sensitive to price increases, it did not make sense for the parties to rise fares. Also the high degree of market transparency due to the use of revenue management systems was not relevant. At least until 2009 the parties competed on prices and the fares were decreasing in spite of market transparency. Then, the ICA held that the increasing fuel costs did not constitute a credible explanation as the price increases were much higher. Finally, the ICA said that also the need to recoup losses did not explain the parallel pricing. Since the Moby links were more profitable than those of competitors, it had little incentive to align to its competitors pricing policies.

The ICA found structural factors conducive to price collusion in the links between Moby, GNV and SNAV. These operators have set up the CIN joint-venture to bid for ailing publicly owned Tirrenia, a major ferry operator, to be divested by the State. To draft the bid they had exchanged information about their commercial policies. They also discussed their pricing policies for the years to come. The ICA also pointed to the two commercial agreements concluded by Moby and GNV. The coding share agreement for the Civitavecchia-Olbia route resulted in the joint provision of the ferry services on this route. The revenues were allocated on the basis of pre-agreed percentages irrespective of the tickets sold by the parties. This arrangement was then conducive to collusion since the parties had no incentive to compete on prices. Also the coding share agreement for the Genoa-Porto Torres route was liable to have a negative effect on competition. Since both Moby and GNV operated this link, it prompted passengers that were unable to find a place with the GNV vessels to buy tickets from Moby, instead from the other competitors Saremar and Tirrenia.

In Gulf of Naples the ICA reopened an Article 101 TFEU investigation into an alleged cartel regarding maritime links in the Gulf of Naples against Alilauro, Medmar Navi, NLG, SNAV, ACAP, Gescab, CLMP, Metrò del Mare and CLMN. It closed the first proceedings in October 2009 by a commitment decision by which it imposed on the parties a number of behavioral commitments. First, they parties gave the undertaking to not exchange sensitive commercial information. Second, the undertakings taking part in the CLMP consortium committed to terminate it. Third, the parties committed to draft a service charter and abide by certain qualitative standards in the provision of maritime links.

The ICA believed that the parties were not implementing the remedies imposed by the 2009 commitment decisions. It also feared that the parties were coordinating their commercial policies and that amounted to further breaches of Article 101 TFEU and the corresponding provision in Article 2 of the Italian Competition Act n. 287/1990. In that regard, the ICA considered the press releases from ACAP, a local trade association regrouping a number of ferry operators, announced that its members, SNAV, Alilauro, NLG, Medmar Navi and SMLG  would  withdraw special fares for residents and commuters. The ICA saw the press release as evidence for a price collusion among the above ferry operators members of ACAP infringing the commitment to not exchange sensitive information. The fare increases announced through the Gescab joint venture by SNAV, Alilauro, NLG breached the commitment to terminate the CLMP consortium, as the activities of  Gescab are similar to that of CLMP. Gescab also appeared as a forum to exchange data between the parties and therefore it might be in breach of the commitment to not exchange sensitive information. Finally, on the basis of the several reports about inefficiencies, the ICA believed that the parties failed to comply with the qualitative standard obligations.

In Strait of Messina the Italian Competition Authority (ICA) opened an Article 101 TFEU investigation on the price-fixing and market sharing practices affecting the maritime lilnks across the Strait of Messina allegedly carried out by Caronte&Tourist (CT), Rete Ferroviaria Italiana (RFI) and its subsidiary Bluferries, Meridiano, Terminal Tremestieri (TT), Metromare and Ustica Lines.

The ICA preliminary investigations showed an alignment in the pricing policies applied over the past three years by CT and the RFI group. The ICA noted that when Metromare entered the market in October 2010 CT aligned its fares with those of Metromare with a 150% increase. Also the fares applied by the parties for freight transport services increased over the examined period.

In addition, the ICA pointed to some market conditions and connection between the parties conducive to collusion. The demand for ferry transport services is particularly inelastic. On the supply side, CT is the largest operator and the market structure is rather crystallized. Over the past 10 years the only new operator to enter the market was the Metromare consortium which is partially owned by Blueferries of the  RFI group. As owner of essential and scarce facilities, ferry terminals, RFI enjoys a strong market position vis-à-vis its competitors. As a result, it might be in the common interest of CT and the other ferry operators to coordinate their commercial policies with RFI than compete with it. Also the links between the parties were perceived by the ICA as a factor conducive to collusion. Indeed. TT is a joint-venture set up by CT, Bluferries and Meridiano. Representatives from CT and RFI sit in the Comitato Portuale that is the main collegiate body of the Port Authority of Messina. For those reasons the ICA believed that the parties had put into practice a complex arrangement by which they colluded on prices and apportioned particular market segments amongst themselves.

Conclusive thoughts

Sardina Ferry Fares confirms that under Italian competition law coordinating a price increase to react to tough market conditions is a anticompetitive agreement, even though the agreed increases were implemented in different ways. It also a remainder of the relevance that structural links between the parties may have to find a price-fixing practice in parallel pricing policies. Considering that similar links appears to exist also in Strait of Messina and  Gulf of Naples it can be argued that they might have a key role in the ICA rulings. Finally, in spite of the serious competition breach found in Sardina Ferry Fares, the amounts of fines levied by the ICA is quite low. It imposed a € 5.462.310,00 fine on Moby, a € 2.370.795,00 fine on GNV, a 231.765,00 fine on SNAV and a € 42.575,00 fine on Marinvest. In that regard, the ICA declared that Marinvest and SNAV had a minor role in the collusion. The former was merely a price follower and did not have any qualified contacts with the other cartelists. The latter exited the market in May 2011. Moreover, the ICA reduced the fine for all parties by 30% owing to their losses resulting from the latest financial statements. Arguably, while recovering from financial losses was held to be irrelevant for the purpose to establish a competition breach, the tough financial situation of the undertakings was instead considered by the ICA when setting the amount of penalties.