Ferry Debacle May be Over Whilst Parcel Freight Forwarding Cartel Fined Millions Again

UK – FRANCE – Two big decisions affecting the shipping and logistics sectors this week with news that the UK Supreme Court has ruled that the Competition and Markets Authority (CMA) took the correct approach in assessing whether Eurotunnel’s acquisition of three ferries and related assets, formerly owned by SeaFrance and subsequently operating as MyFerryLink, should be treated as a merger under the UK merger control rules. Meantime in France the French Competition Authority (FCA) has fined Alloin, now a subsidiary of freight forwarding group Kuehne & Nagel (K&N), €32 million, plus penalties for 19 other companies ranging from €10,000 (after a 99.9% reduction), to in excess of €99 million.

Firstly the seemingly endless saga of SeaFrance may actually now be over. In a statement today Eurotunnel, which leased two of the three ferries to DFDS in September, has expressed disappointment that the Court has upheld an earlier judgement by the Competition Appeal Tribunal (CAT) that the CMA had correctly identified the deal as a merger. The statement reads:

“The Eurotunnel Group is extremely disappointed by this decision as MyFerryLink had proven its capacity to provide a high quality, competitive service. MyFerryLink had hoped to restart an activity with the freight only ferry, Nord-Pas-de-Calais, which would have ensured 130 jobs. As the decision by the Supreme Court no longer permits this, the Eurotunnel Group will put its last ship, the Nord-Pas-de-Calais, up for sale.”

The CMA decision to press on with case having lost an earlier appeal had more to do with clarifying what constitutes a merger, rather than a vindictive exercise against French interests. The Court ruled that despite a ‘hiatus of over seven months’ the operations of SeaFrance had, for all practical purposes, simply continued under another name. The Court also highlighted another important point declaring that the state owned parent company of SeaFrance, SNCF, had incentivised via a Plan de Sauvegarde de l’Emploi (known as the PSE3), the employment of former staff by Eurotunnel.

This PSE3 stated that SNCF would pay between €3,600 and €25,000 per head, to any employer who took on each one of the redundant staff, with the higher end payment going to anyone who employed the worker in a role on an ex SeaFrance vessel in a similar ferry operation. What is particularly interesting about this is whether SNCF actually paid up, either to Eurotunnel, who never actually employed SCOP (the ex SeaFrance staff operation) directly, but only by way of a fixed term contract, to SCOP itself, or indeed to DFDS which agreed to take on a proportion of ex SeaFrance staff when leasing the ferries from Eurotunnel.

The CMA initially sought permission to appeal this matter in May 2015 with the hearing taking place in October and culminating in this current Supreme Court judgement. A statement from the CMA reads:

“In the light of developments that have taken place in the last few months, including Eurotunnel deciding to lease 2 of the ferries to DFDS and regarding the operation of the Nord Pas de Calais freight ferry, the CMA will consult relevant parties and seek to work constructively with Eurotunnel and DFDS in order to determine the appropriate next steps.”

At K&N an appeal is being considered after the decision to fine the company for offences attributed to its Alloin Group subsidiary which it acquired in 2009. The bulk of offences refer to dates prior to the takeover deal and K&N says it has been cooperating with the FCA since 2010 and dissociates itself from such business practises.

In fact that cooperation has rewarded K&N financially as, together with Deutsche Bahn (on behalf of its own subsidiary Schenker-Joyau (later Schenker France) which first brought the matter to light in 2008. The offences concern the express parcels market, a business in France at the time worth around €8.5 billion, but, with significant overcapacity leading to a decline in jobs and several bankruptcies and withdrawals from the market, effectively cutting capacity by around 11% in 2008.

In seven successive years the guilty companies colluded on rates, communicating with each other, setting rates for annual price increases and flaunting antitrust regulations. Acting effectively as a cartel the 20 courier companies met mainly at meetings of a trade association, TLF, which, instead of acting as a regulator in compliance with competition rules, was both actively involved in the organisation of illicit trade and the disregarding confidentiality rules.

In calculating penalties, the Authority took into account the duration of the practices, their severity and the damage caused to the economy including to SMEs, which lacking in sufficient bargaining power, were the main victims of the agreements. It nevertheless adjusted its sanctions to the specificities of the case, including reducing to 6 companies (Ciblex, Heppner, Lambert and Valletta, XP France, Transport Henri Ducros and Ziegler) reducing the amount of penalties by around 90% to take account of their current financial difficulties. Both TLF and fifteen of the conspirators were also punished for fuel surcharges imposed between May 2004 and January 2006.

The documents seized by the French regulators offer unequivocal evidence of routine collusion between the co-conspirators, evidence which shows the practices to have simply become routine for some whilst others took elaborate steps to conceal their intent. The full transcript from the FCA can be read here together with a table of fines imposed. The eight main members of the cartel, Geodis, Chronopost / Exapaq (DPD France), DHL, TNT, Mory, Dachser, Heppner and GLS represented 71% of the entire market demonstrating the effect these agreements had on the market as a whole.

As to clemency, Deutsche Bahn did not obtain the immunity it was seeking as it failed to disclose one meeting in 2010 and consequently was fined €3 million. Kuehne + Nagel (Alloin) actually received a 30% discount for its subsidiary role as an informant against the others whilst overall the total of fines imposed by the Authority came to €672 million.

A full list of the companies involved in the cartel is: K&N Alloin, BMVirolle, Chronopost, Exapaq (now France DPD) Ciblex, Dachser France, DHL Express France, FedEx Express France, Gefco, Geodis, GLS France, Heppner, Lambert and Valletta XP France, Norbert Dentressangle Distribution, Normatrans, Joyau (Jewel) Schenker (Schenker France), TNT Express France, Transport Henri Ducros, Ziegler France.

To discover more about the history of these stories type a suitable keyword such as SeaFrance, MyFerryLink, cartel or antitrust into the News Search box at the head of any page.