EC issue rules on shipping conferences, shipping pools

The European Commission has adopted guidelines for shipping companies as shipping conferences lose their block antitrust exemption.

Given the importance of maritime transport of goods to so many areas of the European economy, I have to make sure that the sector is operating as competitively as possible, keeping prices down and quality of service high, said Neelie Kroes, the EC's competition commissioner. By providing guidance to maritime operators on EU competition rules, these guidelines mark a significant step towards better enforcement in the maritime sector.

Essentially the guidelines are consistent with what has been said before: if an exchange of information is assessed to reduce competition by reducing autonomous policy decisions by undertakings, by revealing actions or intentions of competitors, this is not allowed, said Nicolette van der Jagt, secretary general of the European Shippers Council. The council, similar to the National Industrial Transportation League in the United States, represents shippers.

This is going to be a challenge for industry: carriers, who are part of the European Liner Affairs Association's data exchange system and intend to have discussions on the data in their future trade association, have to carefully assess their own behavior, van der Jagt said. Some of this makes it clear that carriers will be walking on very thin legal ice.

The council said it will closely monitor exchanges of information developed by the liner shipping sector for compliance with EU competition law and its impact on liner trades elsewhere. But it added it was looking forward to a liberalized market where carriers will be allowed to operate freely and determine their individual market strategies.

As of Oct. 18, carriers based in Europe or elsewhere currently taking part in conferences operating on trades to and from the European Union will have to end their conference activities -- in particular price-fixing and capacity regulation -- on those trades.

The European Commission said, Although conferences are tolerated in other jurisdictions, no conflict of law arises. This would only be the case if one jurisdiction were to require carriers to participate in conferences, whereas another was to prohibit it. This is not the case.

It said liner carriers will continue to be allowed to take part in consortia and engage in operational cooperation for the purpose of providing a joint liner service, but not to fix prices.

The EC said carriers may choose to exchange information on the business and/or to meet in a trade association.

However the guidelines explain that under certain circumstances, the exchange of commercially sensitive information may be anticompetitive. The EC said the guidelines provide the analytical framework and the relevant factors so that liner operators are able to self-assess the compatibility of their possible information exchange schemes with the EU competition rules, and summarize the current legal position on the extent of permissible discussions within trade associations.

In a statement, EC also discussed the impact of the new regulation on pool agreements, commonly used in the bulk trades.

It noted that while pool agreements vary widely, a pool generally brings together a number of vessels that are under different ownership but of a similar type. Pools are usually operated by a pool manager, which is responsible for commercial management of vessels.

It said agreements that result in joint selling in tramp shipping pools would require careful consideration under the competition rules.

If a pool agreement includes joint selling but also includes elements of joint production, it must be ascertained whether the center of gravity of the agreement is joint selling or joint production. In the latter case, the agreement would appear less likely to infringe Article 81 of the EC Treaty.

But it said tramp pool agreements do not pose competition problems if the participants cannot be considered actual or potential competitors. Moreover, under certain conditions, pools that have very low market shares are unlikely to raise competition problems. Finally, even pools that appear to feature anticompetitive elements may be compatible if it can be shown that the pool brings better service or better prices to its customers. It is up to the parties to the pool agreement to demonstrate this point. 

Source: American Shipper