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  • OTLT.USA
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    0.290
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  • TSTOPVRPM.LAXDAL
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  • TSTOPVRPM.PHLCHI
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  • TSTOPVRPM.LAXSEA
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    1.000
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  • ITVI.USA
    15,378.070
    -88.350
    -0.6%
  • OTLT.USA
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    0.001
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  • OTRI.USA
    20.820
    0.290
    1.4%
  • OTVI.USA
    15,350.040
    -89.040
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  • TSTOPVRPM.ATLPHL
    3.280
    -0.020
    -0.6%
  • TSTOPVRPM.CHIATL
    3.190
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  • TSTOPVRPM.DALLAX
    1.560
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  • TSTOPVRPM.LAXDAL
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    126.000
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American Shipper

Carriers reject call for end of conference antitrust at Brussels hearing

Carriers reject call for end of conference antitrust at Brussels hearing

   Representatives of container shipping lines have rejected shippers’ calls for an end to conferences’ antitrust immunity under European law during a European Commission public hearing in Brussels Thursday.

   In heated exchanges before European Commission competition lawyers and European government officials, carriers sought to defend their antitrust immunity, arguing that the benefits of conferences that were cited in EC Regulation 4056 of 1986 still play a role today. Carrier officials and their lawyers insisted that conferences provide rate and ship supply stability, denying contrary arguments by shippers, and alleged that shippers have provided no hard facts proving that the immunity should not continue.

   “Our industry is important,” Ken Sorensen, director of the European Liner Affairs Association, told the hearing. “It deserves a thorough review. Against that benchmark, the consultation process so far, I have to say, has regrettably failed.”

   Sorensen, a former APL executive, noted that a European Commission consultation paper issued in March did not produce sufficient market information to reach conclusions on a potential reform of Regulation 4056.

   The EC hearing was attended by a high-power delegation of carrier executives that included: Knud Stubkjaer, partner of A.P. Moller-Maersk; Jacques Saade, chairman of CMA CGM; Klaus Mewes, chief executive officer of Hamburg Sud; Minoru Sato, managing director of NYK (Europe); Ulrich Kranich, managing director of Hapag-Lloyd Container Line; and Chris Koch, president and CEO of the Washington-based World Shipping Council.

   However, shippers’ organizations put pressure on carriers by saying the alleged benefits they get from conferences are fictitious.

   “Price fixing does not have the objective of sharing any economic benefit with customers and consumers,” said Mark Clough, partner at Ashurst Morris Crisp and lawyer representing the European Shippers’ Council.

   In an apparent departure from previous policy, the European Shippers’ Council also said it sees no value in rate stability — one of the alleged benefits of conferences.

   “Even if price fixing were to have the effect of achieving its objective — call it ‘price stability’ if you like — it will thereby eliminate effective competition in a market,” Clough said.

   Asked whether shippers were ready to take the risk of the elimination of conferences, Clough replied emphatically: “Yes!”

   “They will live with supply and demand. Shippers do not want this wonderful (price) benchmark of conferences,” he added.

   Clough alleged that it was “scandalous” that Europe continued to allow carriers to “decide” freight rates.

   The European Commission expressed some frustration that shippers and carriers were not prepared to provide direct answers to technical questions that it asked during the hearing.

   Neither carrier representatives nor shippers offered suggestions of potential amendments of the conference regulation, or alternatives that could replace the current immunity. Questions on whether the immunity was “proportional,” and whether carriers could still provide reliable services to shippers without the immunity, did not produce substantive answers from carriers.

   Sorensen said it is impossible to disentangle the role played by conferences and consortia in providing stability and economic efficiency.

   “Carriers accept the need for reform of 4056,” said Trevor Soames, the lead lawyer for carriers at the EC Hearing. “Conferences may look like, but do not act like, cartels.”

   Soames noted that following the “Revised TACA” agreement, approved by the EC, carriers do not know the prices charged by fellow conference carriers. He said carriers merely agree on a tariff that serves as a benchmark for carriers’ individual service contracts or equivalent arrangements with shippers. Individual service contracts or equivalent arrangements with shippers are “unregulated,” said David Wood, a senior lawyer representing carriers.

   “Unfettered competition is clearly worse than the current arrangements,” Soames said.

   Shippers and carriers disagreed on the question of the burden of proof for any change in regulations. Shippers argued that carriers benefit from the immunity, and should prove that it is still justified, whereas carriers said both sides should share the burden of proof.

   Sorensen compared the situation to a surgeon telling a healthy patient “I will amputate your leg unless you prove to me that it is functioning well and does not require amputation.”

   “It has not been shown by carriers that competition restriction agreement benefit the economy, benefit users, and are indispensable to provide these benefits,” said Jean-Paul Tran Thiet, attorney partner at CMS Bureau Francis Lefebvre, representing the French shippers’ council AUTF. Responding to the leg amputation analogy, he said the conference pricing immunity gives carriers five legs, when other industries have just two.

   Tran Thiet showed the EC hearing a recent announcement of a general rate increase by the Europe/East Coast of South America conference, saying that rates will be increased at short notice, without giving reasons or inviting consultation from shippers. He criticized the “opacity of prices” in liner shipping, and said that freight surcharges are “imposed” without any room for negotiation.

   Tran Thiet cited a study by the Singapore National Shippers’ Council of an increase in terminal handling charges. Whereas carriers sought to justify the higher terminal charge by saying port costs had increased, the port authority of Singapore said it had lowered its tariffs over the same period, he said.

   But carrier representatives from the United States and Australia said that reviews of the conference immunity in their countries had resulted in retaining the immunity.

   Leonardo Sorgetti, spokesman for the European forwarder lobby Clecat, told the hearing that forwarders favor a conditional retention of the immunity for conferences. Their pricing immunity should cover only maritime ocean freight, but not terminal handling charges, port surcharges and inland charges, he said. Conferences should also give six months’ notice of planned rate increased. Without these conditions, Clecat said it would support full liberalization, Sorgetti said.

   At the hearing, the European Liner Affairs Association suggested to the European Shippers’ Council and the EC that they work together to agree on terms of reference for the gathering of freight rate data, which it regards as necessary to continue the regulatory review. The ESC did not take the carriers’ offer, saying that carriers already have all the data. Carriers also insisted that much more work remains to be done before the EC can make proposals for regulatory changes.

   The review of the conference regulation is the first since the law was adopted 17 years ago. Some 170 industry and government delegates and lawyers attended the Brussels hearing.

   The EC hearing showed the antagonistic relationship between shippers’ and carriers’ organizations in Europe. The hearing was told that, despite a requirement that conferences consult shippers under Regulation 4056, no such consultation has taken place for about 10 years.

   The EC will now compile and review the answers from the industry. Competition commissioner Mario Monti will decide the next step of the review. EC officials could not say whether the agency will now publish of “green paper” of potential policy options, or undertake further information-gathering procedures like ordering the production of data on individual service contract rates.

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