Fair competition in liners' fees and sea freight surcharges

Facts
Decision
Comment

The Tribunal of Genoa recently issued an interesting judgment addressing the applicability of fair competition principles to certain contractual provisions generally used by most major line carriers – in particular, certain fees and surcharges over sea freight.

Facts

The dispute regarded a claim filed by a group of freight forwarders which held that certain surcharges generally applied by the major line carriers – the 'LO-LO' charge (the fee for lifting containers from terminals to trucks or trains and vice versa), the documentation fee, the manual documentation processing fee and the empty container inspection fee – should be declared null and void pursuant to Article 1418 of the Italian Civil Code, as they do not correspond to any particular service rendered by the carrier, but rather merely represent a duplication of costs already included in the freight.

The freight forwarders also claimed that these surcharges did not comply with the principles of fair competition enshrined in Article 2598 of the Civil Code; accordingly, the court should order the line carriers to cease application of the surcharges in contracts of carriage.

The claimants argued that the LO-LO charge in particular was contrary to fair competition rules, as it was applied only where carriage by road (if any) was organised solely by the freight forwarder and not by the line carrier or a company appointed by it. As such, this method of applying the LO-LO charge should be regarded as a type of unlawful boycott.

Decision

The Tribunal of Genoa rejected the claimants' demands.

The tribunal disagreed that the contested surcharges were unjustified, holding that they were valid and enforceable as they were freely agreed on by the parties and noting that the courts have no authority to decide whether the relevant amounts are economically reasonable. In this regard, the judgment stressed that the courts are not entitled by law to interfere with the business judgements of contracting parties and cannot question the adequacy of the economic balance of the contract itself.

In respect of the unfair competition claims, the tribunal held that there was nothing intrinsically unlawful in the contested method of application of the LO-LO charge. Rather than a type of boycott, it represented merely a commercial discount for clients which decided to entrust the line carrier with the organisation of road carriage as well.

The tribunal further held that this method of applying the contested surcharge may have become relevant from a competition point of view (and possibly even unlawful) if the claimants had argued and proved that the line carrier held a dominant position in the market. In such case, the contractual provisions in question – which were otherwise lawful in themselves – would have constituted abuse of dominant position and thus fallen under the scope of national and EU legislation governing fair competition.

Comment

The Tribunal of Genoa's judgment is interesting, as it identifies behaviours and contractual practices which become relevant under the competition rules. It clearly affirms the general principle that fees and surcharges commonly applied by line carriers are valid and enforceable and have no competition implications.

It further confirms that, due to the general applicability of the competition rules to the shipping industry, certain contractual provisions and practices (in this case, the method of applying the LO-LO charge) which are lawful in themselves may become relevant and punishable under the competition rules only if the line carrier is proven to hold a dominant position in the market.

For further information on this topic please contact Brian Dardani or Luca Di Marco at Dardani Studio Legale by telephone (+39 010 576 1816), fax (+39 010 595 7705) or email (brian.dardani@genoachambers.it or luca.dimarco@genoachambers.it). The Dardani Studio Legale website can be accessed at www.dardani.it.