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IP/05/1408

Brussels, 10 November 2005

Competition: Commission publishes study on impact of repealing exemption for liner shipping conferences

The European Commission has published a study undertaken by outside consultants on the potential impact of a repeal of the Block Exemption Regulation for liner shipping conferences. The Commission stated that it was considering repealing the Block Exemption in its October 2004 White Paper on the issue (see IP/04/1213). The study found that repealing the current exemption for liner conferences from EC Treaty competition rules’ ban on restrictive business practices is likely to lead to a decline in transport prices and will have either no impact or a positive impact on the competitiveness of European liner shipping firms. An alternative information exchange system proposed by the European Liner Affairs Association (ELAA) should, according to the consultants, not be accepted in its current form because it could facilitate collusion between shipping firms to the detriment of customers.

Following the White Paper of October 2004, a study was commissioned to analyse the potential impact of repealing the Block Exemption Regulation for liner shipping conferences (Council Regulation 4056/86 – see below). The independent study, which is now made available to the public, is the fruit of the combined work of Global Insight, an international consultancy with significant experience in liner shipping, the Berlin University of Technology and the Institute of Shipping Economics and Logistics in Bremen.

The study’s main findings on the potential impact of repealing the conference block exemption are:

  • transport prices for liner shipping services will decline
  • service reliability on deep sea and short sea trades is expected to improve
  • service quality will either be unaffected or will improve
  • there is either a positive impact or no impact on the competitiveness of EU liner shipping firms and
  • small liner shipping carriers will not experience particular problems.
  • no negative impact or even a positive impact on EU ports, employment, trade and /or developing countries.

The European Liner Affairs Association (ELAA), representing more than 70% of the global liner shipping industry, has proposed to replace the current Block Exemption Regulation with an information exchange system. Global Insight concluded that the ELAA proposal should not be accepted “as is”. According to the consultants, the set-up and procedures of the proposed system constitute an “invitation to collude” between liner shipping carriers to the detriment of transport users and final consumers.

Background

Shipping companies have traditionally organised themselves since the nineteenth century as liner conferences whereby they would agree common or uniform freight rates in return for ensuring regular scheduled maritime transport services to shippers and freight forwarders. Such liner conferences allow shipping companies to fix the price for transporting goods between the European Union and other countries, including the Far East and the United States.

Liner shipping conferences have historically been granted some form of exemption or immunity from the competition rules in many jurisdictions. The European Union’s Council of Ministers adopted a Liner Conference Block Exemption Regulation (4056/86) in 1986, which exempt price-fixing, capacity-regulation, under certain strict conditions, and other agreements or consultations between liner shipping companies from the EC Treaty competition rules’ ban on restrictive business practices. The justification for the block exemption was the assumption that the rate-setting and other activities of liner conferences led to stable freight rates, which in turn assured shippers of reliable scheduled maritime transport services.

The review of the Block Exemption Regulation was undertaken in the context of the conclusions of the Lisbon European Council in 2000 which called on the Commission “to speed up liberalisation in areas such as gas, electricity, postal services and transport”. Liner shipping is a global industry that is of crucial importance for world trade since 75% in volume terms (45% in value terms) of EU exports and imports are carried out by sea. The review also takes place following an OECD Secretariat report in 2002 that recommended removing anti-trust exemption for price fixing and rate discussions. Other jurisdictions, notably Australia, are also currently reviewing their legislation.
The study and all other documents can be found on the Commission’s Europa website:

http://ec.europa.eu/competition/antitrust/legislation/maritime/

The review process was launched in March 2003 with the publication of a Consultation Paper (see IP/03/445). A White Paper was published in October 2004 (see IP/04/1213). The review process is due to culminate with a Commission proposal to the EU’s Council of Ministers to repeal the Block Exemption Regulation by the end of the year.

The Commission has already held extensive discussions with the Member States.


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