On the 28th November 2002, the District Court of Rotterdam gave judgment in the case between a number of oil transporting shipping companies and the municipality of Rotterdam on the question of whether the amount of the seaport dues charged by the municipality for the use of the port facilities constituted an abuse of dominant position.
View of the shipping companies
The shipping companies claimed that the municipality of Rotterdam charged a tariff that was excessive in relation to the economic value of the services rendered. According to the shipping companies, the tariffs were unreasonably high, and the profits excessive. Moreover, it claimed the pricing system resulted from a system of concealed, internal cross-subsidies. The shipping companies believed that the container sector in particular was supported by the proceeds of the seaport dues for oil tankers. They argued that the municipality intended to strengthen its competitive position in that sector.
The shipping companies further argued that the municipality abused its dominant position (under Article 82 EC and Article 24 of the Dutch Competition Act (Mw)) on the relevant market by charging excessive and discriminatory seaport dues to oil tankers for the use of the port facilities. In this context, the shipping companies referred to the criteria that the Director-General of the Dutch Competition Authority set in relation to the pricing on monopolist markets in its “Rapportage Luchthaventarieven Schiphol” (Airport Tariffs Report) dated 10 April 2001. In this report, the NMa indicated that a monopolist undertaking abuses its dominant position if it charges prices which are above a cost-orientated level.
Defence of the Municipality
The municipality argued that Articles 82 EC and 24 Mw do not lead to a system of structural price control under which dominant undertakings could be forced to charge cost-oriented tariffs. The pricing of the seaport dues is not aimed at eliminating competitors or the exploitation of users. The pricing can be explained and objectively justified by the context of the market in which the municipality operates. This market can be characterised as a capital-intensive long-term market.
The Judgment of the District Court
The District Court started its assessment by demarcating the relevant market, which it defined as the market for (handling) services for sea ships that call at the port of Rotterdam. According to the District Court, the foreign seaports, which the municipality claimed as part of the relevant geographical market, are no real substitute for the seaport of Rotterdam; therefore, a larger geographical area does not have to be taken into account. It is evident that the municipality has a factual monopoly on the relevant market, and therefore a dominant economic position.
The intention of the municipality to meet competition from the foreign seaports cannot constitute a justification to charge unreasonably high prices to buyers on its home market, according to the District Court.
Furthermore, the District Court considered that it cannot be assumed that prices are unreasonable high if the prices - in a monopolistic market - are not cost-oriented. There is no economic or legal rule on the basis of which it should be assumed that the boundary of abuse has been reached if the difference between the cost price and the selling price exceeds a certain percentage, let alone how such a percentage should be determined. The fact that in sector specific regulations (particularly in the telecommunications sector) the requirement of cost oriented tariffs is set with regard to significant market power, does not indicate a generally applicable norm under competition law for companies with a dominant economic position.
In the opinion of the District Court, the starting point for assessing abuse should be that a price that is significantly higher than the cost of the actual use, without an – from an economic view – objective justification should be considered as abusively high.
The District Court further considered that a company with a dominant economic position, and in all events a monopolist, may be required to keep transparent accounts. In assessing reasonable level of profit for a specific dominant company, a comparison with the profit in the other comparable (geographical) markets can be an important indicator.
Written by Pauline Kuipers and Liselotte van Wijngaarden.