EC ready to act on conference reform without industry proposals

EC ready to act on conference reform without industry proposals    The European Commission’s competition directorate said that it may go ahead with its own assessment of the review of Europe's conference antitrust regulation 4056/86, after the carriers' and shippers' organizations were found unable to provide sufficient industry submissions in recent consultations.
   Data gathered during industry consultations to measure any efficiency gains from the operation of liner conferences “appears inconclusive at this stage,” Lowri Evans, director of services at the EC’s competition directorate, told the Containerization International conference in London. The EC sought to assess whether conferences provided benefits to the industry, whether shippers received a fair share of the benefits, whether conferences are 'indispensable' to provide the benefits, and whether there was still 'effective competition' despite price agreements by conferences.
   Evans accused ocean carriers and shippers of having failed to provide suggestions on alternatives to the way carrier agreements could be regulated.
   “Absent industry proposals, we will have to make our own assessment,” she said.
   The EC launched its review of Europe's liner conference immunity regulation in March 2003, and conducted public hearings of industry representatives in December. The three potential outcomes of the regulatory review will be retaining the status quo, a revision of the regulation, or its repeal. Evans would not disclose which of the three alternatives is favored by the EC.
   “We are at the phase of analyzing – finishing the analysis – of this (consultation) material now,” Evans said.
   She added that industry submissions until now were not focused, and did not suggest alternatives to the current pricing immunity of conferences. Carriers advocated the retention of the status quo and shippers the complete elimination of the pricing immunity of conferences.
   “There are no concrete, realistic proposals (of alternatives) on the table at the moment,” she told the conference.
   The EC will start discussions next month with European governments on the next stage of the regulatory review, Evans said.
   European governments, who have been lobbied by the industry, may also come up with suggestions.
   Depending on the outcome of the discussions, the EC may issue a policy proposal, Evans said.
   Yet, it is European governments, who had introduced the original 4056/86 conference antitrust regulation, who will have the final say on any reform of the regulation.
   The European Liner Affairs Association, which represents liner carriers in Brussels, denied that it has failed to answer questions during the EC consultation, but said that the review should gather additional information on the effect of conferences on stability.
   The carrier association has commissioned a third-party company to gather data on freight rates, volumes and market shares. It plans to submit the survey results to the EC in early May.
   Ken Soerensen, executive director of the European Liner Affairs Association, said that, before amending the current regulation, the burden of proof to demonstrate the need for any change should lie on both shippers and carriers. The EC had stated that the burden of proof to retain the pricing immunity should be borne only by ocean carriers.
   He also argued that talk of price-fixing in liner shipping thanks to liner conferences is “theory.” There are common price benchmarks, but agreements between shippers and carriers are individual and confidential, he asserted.
   There have been informal suggestions in the industry that the authority of conferences — the ability to agree on rates and have a common tariff — could be replaced by discussion agreements of the sort that exist in the American trades. Discussion agreements in the transpacific and other trades can make joint, non-binding recommendations on price.
   Commenting on a potential move to discussion agreements, Evans noted that EC competition commissioner Mario Monti has condemned them in a speech made last year. Evans added that Australian authorities have also criticized the Asia-Australia Discussion Agreement.
   Filip Beckers, chairman of the ocean transport committee of the European Shippers’ Council, said that shippers would reject any proposal to replace conferences by discussion agreements.
   “Discussion agreements are like conferences,” he said. “Shippers and their representatives will be opposed to the status quo or anything equivalent.”
   Another potential alternative, according to Evans, would be the practice of long-term contracts.
   “Some have said that long-term contracts would achieve the same thing as conferences,” she said.
   Beckers, at the ESC, said long-term contracts are common in bulk shipping, but not in liner shipping.
   However, the European Liner Affairs Association’s Soerensen said that shippers are not interested in such contracts, and there has been a tendency “to renegotiate all the time” in cases where long-term contracts were agreed.
   Shippers “want to play the market,” he added. “Shippers only want a long-term contract when the market is at the bottom.”