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Brussels, 25th September 2006

Competition: Commission welcomes Council agreement to end exemption for liner shipping conferences

The European Commission has welcomed the unanimous adoption, at the 25th September Competitiveness Council, of the Commission’s proposal to repeal the exemption from the EC Treaty’s ban on restrictive business practices (Article 81) for liner conferences on routes to and from the EU. The current block exemption, established by Council Regulation 4056/86 allows carriers to fix prices and regulate capacity jointly. The repeal will enter into effect in October 2008. To ensure that the new regime fosters competitive markets, the Commission will issue Guidelines on the application of the competition rules to maritime transport before the end of the transitional period. The Council also empowered the Commission to apply EC Treaty competition rules to cabotage and tramp shipping, by extending the scope of the competition implementing rules (Regulation 1/2003).

Commissioner Charlie McCreevy, who is handled the proposal, said “I am delighted the Council has adopted this proposal less than a year after we presented it. The European shipping industry will benefit from the more competitive market that will result from the repeal of the block exemption and the EU economy as a whole stands to benefit from lower transport prices and more competitive exports.”

Liner shipping (i.e. the provision of regular, scheduled maritime freight transport, chiefly by container) has been organised in the form of cartels – called liner conferences - since the 1870s. Liner shipping is an important part of the EU economy as 40% by value of EU external trade by sea is transported by liner carriers. Liner conferences are agreements between liner shipping companies on prices and other conditions of carriage: as such they reduce competition between members of those conferences, and lead to higher prices for users.

The Commission’s proposal to repeal the block exemption for liner conferences was the result of a three year in-depth investigation by the Commission during which extensive consultations with carriers and transport users (shippers and freight forwarders) took place. Carriers recognise that price fixing is no longer necessary in today’s market conditions and the shippers expect the reform to trigger a new era of customer-focused relations with carriers.

The abolition of the exemption for liner conferences will affect EU and non-EU carriers operating on routes both to and from Europe. The market distorting effects of price fixing will be corrected, and lower prices for sea containers are likely to result.

In order to ease the transition to a fully competitive regime, the Commission will, in line with a recommendation by the European Parliament, issue Guidelines on the application of the competition rules to maritime transport services, in consultation with all stakeholders.

The Guidelines will be issued before the end of the transitional period of two years for existing liner shipping conferences in 2008. With a view to collecting stakeholders’ comments, the Commission will shortly publish a staff paper on the market impact of the industry’s proposal for a new information exchange system.

The Council also extended the scope of Regulation 1/2003. This does not involve a change to the applicable law as EU competition rules already apply to cabotage and tramp shipping. It rather establishes that the Commission can enforce the competition rules in these sectors, in addition to national competition authorities and courts.

In the liner shipping sector, as in others sectors, competition rules are not applied in the same way worldwide. Noting that liner conferences will continue to be tolerated in other jurisdictions, the Commission will take appropriate initiatives to advance the removal of price fixing liner conferences and thus promote further competitive reform of the liner shipping sector.

For further information, see MEMO/06/344.

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