EU Competition Rules in the Maritime Transport Sector

July 1, 2008

For twenty years, the European Commission has been struggling to agree a model on how the competition rules should apply to the maritime transport sector, and above all to liner shipping.

On 1 July 2008, what is probably the final significant piece of this policy was put in place with the adoption of formal guidelines on the extent to which shipping companies may co-operate and, in particular, may exchange information about their commercial activities.

History

Liner shipping companies have for over 100 years provided scheduled maritime transport services around the globe on the basis of wide-ranging agreements, called Conferences, allowing them to fix prices, agree schedules and even to limit output — regardless of their market shares. Contracts with their customers have often been regulated by the Conferences, as have the terms on which suppliers provide services to them. Conferences have long been shielded from the full impact of antitrust rules by wide-ranging exemptions and supervision by specialised agencies.

In the late-eighties and early-nineties, this protection started to unravel as the representatives of cargo shippers sought rigorous enforcement of the existing rules and lobbied for the exemptions to be whittled back, if not abandoned altogether. The European Commission led the way by engaging in persistent investigatory and enforcement actions aimed at securing the narrowest possible interpretation of the rules and seeking large administrative fines where infringements were found.

These cases were largely upheld by the Community Courts in Luxembourg over the period 1994 to 2002 and the tide began to turn for the liner conference system.

Regulatory Review

With the backing of the Community Courts for its policy of strict enforcement in the maritime sector and against the background of a general overhaul of the way the antitrust rules are applied in Europe, the European Commission moved to review whether specific rules for liner shipping could any longer be justified.

The Review was launched in 2003 and led to the repeal of the special exemption for liner conferences in 2006, with effect from 18 October 2008.

The adoption of Guidelines is intended to soften the blow of the repeal of the special regime for liner shipping by giving greater legal certainty as to what forms of co-operation between liner shipping companies are permitted under Community competition rules.

The Guidelines clarify the rules on information exchanges and trade associations in the liner sector and provide more guidance on the legal treatment of tramp pools. In particular, they explain:

• which aspects of market structure and types of information are relevant in assessing the effects of information exchange,
• how to approach market definition in tramp shipping markets,
• the circumstances in which a pool agreement which initially looks anti-competitive may be redeemed by its pro-competitive effects, such as better quality services or lower prices for customers.

The Guidelines will apply for a period of five years starting from 18th October 2008 (the effective date of repeal of the liner conference block exemption).

Comment

For the maritime industry, the Guidelines mark virtually the end of an exceptional and lenient regime for applying the antitrust rules. Their purpose is not to lay down special rules but to give guidance on how the normal rules apply. This in itself is unusually favourable treatment, but should be seen as a measure to assist in the process of adjustment.

For other industries, the Guidelines provide useful guidance in how the European Commission views information exchange as well as the methodology for assessing the competitive effects of production joint ventures. It is not only companies that may benefit from this but also national competition authorities and courts in the EU which are increasingly called upon to apply EU competition law. This may turn out to be the Guidelines’ greatest contribution.