EC informal analysis recommends end of conference antitrust immunity

EC informal analysis recommends end of conference antitrust immunity    The competition directorate of the European Commission has provided its strongest indication yet that it will recommend the abolition of the immunity of liner conferences in Europe.
   In an informal discussion paper of the EC’s review of the conference immunity regime, posted on its Web site, the EC competition directorate cautioned that the paper does not state its official position, but merely sets out the outcome of the recent consultation on a European review of conference regulations, and draws preliminary conclusions.
   However, the contents of the document weigh heavily towards the outright withdrawal of the long-established immunity of conferences in Europe, with a quick timetable for changes.
   “The conditions for an exemption would appear to be no longer fulfilled,” the EC discussion paper concludes. “There is no conclusive economic evidence that the assumptions on which the block exemption was justified at the time of its adoption in 1986 are, in the present market circumstances and on the basis of the four cumulative conditions of Article 81(3) of the Treaty, still justified.”
   The EC said in its latest document that “realistic proposals for amendment of the block exemption (immunity) have so far not been put forward, notably discussion agreements would not appear to provide for a less restrictive alternative.”
   On that basis, the European Commission's competition directorate “would propose to repeal the present block exemption for liner shipping conferences,” it said.
   It added that a conflict of laws on the treatment of liner conferences “has not arisen in the past and is highly unlikely to arise, even if the block exemption is fully repealed.”
   The EC started a review of Regulation 4056/86 on liner conferences in March 2003. During oral hearings in Brussels last winter attended by many chief executive officers and senior executives of carriers, ocean carriers called for the retention of their immunity and for further economic studies, whereas shipper representatives urged the EC to kill the immunity.
   The competition directorate’s discussion paper now says that there is no need to launch further economic studies, and that the competition directorate would propose to move on “to the next stage of the review process” that was agreed with the member states. To that end the EC will prepare a public commission paper, containing concrete proposals for action, in principle this fall.
   The discussion paper rejects the arguments made by carriers and their Brussels-based European Liner Affairs Association on the need for Conferences to assure certain economic benefits.
   “It would appear that the restrictions of competition (price fixing and supply regulation) by conferences are not indispensable, since there are less restrictive alternatives available (notably services by independent operators, operational co-operation through consortia and alliances and long term contracting) which are able to assure equivalent reliable liner shipping services to the benefit of consumers,” the EC paper notes.
   “Even if conferences were to provide for pro-competitive effects in terms of, for example, price stability, reduced uncertainty about trade conditions, possible more accurate forecasts of supply and demand, reliable and adequate services, this would appear in itself not to be sufficient … since it has not been established that the net effect on consumers (transport users and end consumers) is at least neutral,” it adds.
   The EC document also rejects the conference supporters’ argument that conferences are needed because they are part of a “three-leg conference system,” consisting of conferences, consortia and long term contracting.
   The conference tariff (and notably the discussion process of establishing it) would act as a reference point for the market, and set a benchmark in relation to contract rates and so has a stabilizing effect on such rates, according to its proponents. But the EC document said this argument “cannot be accepted” as a justification for the maintenance of the exemption for price fixing and supply regulation by liner conferences and “raises an entirely new issue” as to whether this additional benchmarking effect would not lead to additional restrictions.
   The EC paper rejects the possibility of allowing U.S.-style carrier discussion agreements as an alternative to conferences — a development that certain carriers would see as an acceptable regulatory compromise.
   “By grouping together conferences and their main competitors, they (discussion agreements) tend to lead to the elimination of effective competition on the trade on which they operate,” the EC paper said. “Moreover, the commission has at this stage not received any information as to which benefits discussion agreements can pass on to the consumers.”
   The discussion paper is posted at https://europa.eu.int/comm/competition/antitrust/others/maritime/review_4056.pdf .