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November 10, 2005

EC study is bad news for liner conferences

The European Commission has published a study that appears to seriously weaken the case for shielding liner shipping conferences from competition rules.

Shipping companies have traditionally organized 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.

Liner shipping conferences have historically been granted some form of exemption or immunity from the competition rules in many jurisdictions. 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 services.

In an October 2004 White Paper, the Commission said it was considering repealing the current Block Exemption for liner conferences from EC Treaty competition rules' ban on restrictive business practices.

Following the White Paper, a study was commissioned to analyze 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 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.

The study and all other documents can be found on the Commission's Europa website :

http://europa.eu.int/comm/competition/antitrust/legislation/maritime/

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