EC commissioned report supports end to liner shipping block exemption
An independent report commissioned by the European Commission's Directorate General of Competition has backed the proposal to repeal the competition block exemption for liner shipping conferences, and largely rejected the European Liner Affairs Association’s (ELAA) suggestions for a replacement system.
The 261-page 'The Application of Competition Rules to Liner Shipping' report was published Monday by Global Insight in association with the Berlin University of Technology and the Institute of Shipping Economics and Logistics.
The Directorate General of Competition is undertaking a review of Regulation 4056/86, which grants liner conferences an exemption to set common freight rates and cooperate on capacity. If the block exemption is revoked, conferences will lose their current exemption from European competition regulations.
Global Insight’s findings included:
* “Conferences lead to excess capacity (over-investment) or excess pricing and endanger service reliability.”
* “In the short run, the withdrawal of the conferences system will always lead to lower prices.”
* “In the long run a prohibition of conferences will remove excess capacity ' a repeal of conferences can promote further downward pressure on market prices.”
* “Repeal of conferences will enhance stability of supply.”
In August, the ELAA submitted to the EC a proposal for a new business framework for cooperation between liner shipping services, including a detailed information exchange system.
The report did say that some of the ELAA’s proposals could be positive. “The benefits of the information exchange claimed by ELAA are reasonable in principle,” but it concluded “the entire ELAA package should not be accepted “as is.” As a package, the setup and procedures constitute an invitation to collude that would be hard for many in the industry to resist, at least on occasion, to the detriment of shippers (consumers). In particular, the trade committee concept would seem difficult to defend in competition terms in current circumstances,” Global Insight said.
Global Insight also noted the ELAA, conferences and their members had been uncooperative in providing pricing data.
“Although you would not expect me to agree with everything contained in the report, it does add to the debate and thinking on what is a very complex matter and from this point of view the authors should be commended,” said Chris Bourne, the ELAA’s executive director.
“In recent weeks the ELAA has been engaged in a constructive dialogue with DG Competition and significant progress has been made on most if not all of the issues raised by Global Insight. Based on this report, I hope we can reach a common understanding,” Bourne added.
Global Insight’s report also said that repealing the block exemption would lead to moderate price decline in ocean rates; reductions in ancillary charges and surcharges; improved service reliability in deep sea and short sea trades; and positive impact on developing countries, among other findings.
The United Kingdom-based Freight Transport Association, which represents British shippers and logistics companies, said it was happy with the report’s findings. 'This report vindicates what FTA and other organizations representing the shipping line customers have been saying for many years about the liner conference system,” said Andrew Traill, head of maritime policy for the FTA.
“I seriously hope this will pave the way now for a speedy repeal of the block exemption regulation, ditching any suggestion that it should be replaced with new forms of anticompetitive collaboration among competitors,” Traill said.
Global Insight’s report can be viewed in full at:
http://europa.eu.int/comm/competition/antitrust/others/maritime/shipping_report_26102005.pdf