Carriers ready to give up joint pricing immunity in EU trades

Carriers ready to give up joint pricing immunity in EU trades    Trying to regain the initiative in the review of Europe’s liner shipping regulations, major European and non-European liner carriers have proposed to the European Commission competition directorate an alternative to European conference regulation 4056/86 that would remove the immunity for joint conference rate pricing.
   The proposed new legal instrument would retain a narrower immunity for ocean carriers covering collective activities such as the setting of joint surcharges and the calculation of a price index.
   The Brussels-based European Liner Affairs Association, whose members include Maersk Sealand, Mediterranean Shipping Co., Evergreen, COSCO, APL and another 20 major carriers, said today it has submitted the new proposal for the replacement of the regulation 4056/86 as “a proactive approach to modernizing the regulatory system.”
   However, the European Liner Affairs Association maintains there has been no proof the current conference regulation should be changed, and stressed that its compromise proposal is without prejudice to its former position.
   The shipping industry’s proposal follows criticisms by the EC competition directorate that the industry has made no proposals for alternative regulations, and may be a response to the perceived threat that the EC was ready to press for the outright withdrawal of the long-established immunity of conferences in Europe.
   The European Liner Affairs Association said it believes that its proposal “will preserve stability of service supply for users of liner shipping to and from Europe in the event that 4056/86 is ultimately amended.”
   The proposal was included in an Aug. 6 letter to Lowri Evans, the EC's director of the competition directorate. Shipping lines had kept the letter's contents confidential until now.
   The proposal suggests the narrower immunity would cover six areas of activities:
   * Setting of surcharges and ancillary charges based on publicly available formulae previously agreed with shippers.
   * Discussion and information exchange of aggregated capacity utilization and market size data by trade.
   * Exchange, discussion and evaluation of commodity movements and special container equipment demand by trade.
   * Discussion of aggregated supply and demand data by trade and commodity. Forecasts of demand by trade and commodity would be published.
   * Individual lines will obtain data on their share of the market by trade, region and port. This will be confidential to each carrier.
   * Generating a published historic price index with breakdowns by trade and equipment type.
   The proposed reform would not allow the discussion and adoption of recommendations of freight rates, a common practice among discussion agreements in most United States trades.
   The carriers’ proposals suggest that the conferences and their secretariats would disappear. Instead, entities described as “industry bodies or agreements and committees per trade” would be in charge of the envisaged system of information exchange.
   The European Liner Affairs Association said it believes “this data collection and exchange will provide the necessary tools with which the lines can accurately forecast demand for liner service capacity and container equipment trade by trade and region by region.”
   “So armed, they will be able to continue to plan their investment and manage their resources in order to ensure that service capacity keeps pace with the demands of world trade,” the carrier body said.
   “We feel that the major concerns of many shippers — namely the continued provision of efficient worldwide liner services and the abolition of rate discussions between the lines — have both been well addressed in this proposal,” said Ken Bloch Soerensen, executive director of the European Liner Affairs Association.
   The carrier group has also submitted to the EC a “note on information exchange” to assess the benefits and costs of information exchange and the legal and economic criteria by which any coordinated behavior can be assessed. The nature of the proposed information exchange will make that exchange “pro-competitive,” the European Liner Affairs Association said.
   To satisfy shippers’ and regulators’ demands for confidentiality of contractual information and bill-of-lading data, the carriers’ proposal suggests that commercial data given by individual carriers would be processed through a “black box,” and would be aggregated before circulation to the carriers. No carrier or employee of any carrier would have access to the original data provided to the industry bodies.
   The European Shippers’ Council's reaction to the carriers’ compromise proposal is unknown. However, the shippers’ organization is likely to oppose any immunity allowing carriers to set joint surcharges.