ESC repeats call for end of conference immunity, shuns compromise

ESC repeats call for end of conference immunity, shuns compromise    The European Shippers’ Council (ESC) Thursday urged the European Commission to repeal, without delay, Europe’s Regulation 4056/86, which grants liner conferences an exemption to set common freight rates and cooperate on capacity.
   The radical statement by the Brussels-based shipper group follows the recent proposal for a compromise made by the European Liner Affairs Association (ELAA), a Brussels-based group of 25 major European and non-European carriers in August.
   “This has been very much welcomed as a step in the right direction,” the ESC said. However, the shipper group has not fully endorsed the ELAA compromise.
   The ELAA recently advocated the need for a new European law that would grant carriers a narrower immunity to set joint surcharges and compile price and capacity statistics, but with no authority to discuss and agree on rates. The ESC saying that while it agrees on the elimination of conferences’ pricing immunity, it questions the need for any immunity to set surcharges and carry out statistics for carriers.
   In a policy paper published Tuesday, the shipper group argues that there is no need for a replacement to Regulation 4056/86, and that liner shipping should be deregulated.
   “Now that ELAA has stated its willingness to relinquish price fixing, the ESC believes the rationale for these changes now needs to be applied in creating a genuine environment which will lead to free and competitive market which is not distorted by other means, such as the collective setting of surcharges and ancillary charges,” the ESC insisted.
   “With the development of sophisticated yield management systems, carriers have tools at their disposal to help in the determination of price levels without having to look up price indices for guidance,” the shipper group said in its policy document. “ESC does not believe that carriers need a special block exemption for being able to develop a price index per trade and box type, even if all confidentiality safeguards are put in place. What would be the benefit for the users of such a price index?”
   On surcharges, the ESC said manufacturing industries, like shipping lines, are confronted with fluctuations in bunker costs and currency exchange. The same can be said of costs incurred to ensure security, it added. “As such, there is no specific reason why carriers should continue to enjoy immunity to fix common levels of ancillary charges and surcharges, whereas this privilege is not granted to other industries,” the ESC argued. “The costs covered by these items (as well as terminal handling charges) are part and parcel of the costs incurred to deliver the service and should be covered in one lump-sum called ‘sea freight.'”
   “Why do shipping lines still want to make collective decisions about surcharges and other ancillary charges when these should be representative of the operational costs they each individually occur?” the ESC asked.
   The ESC believes the ELAA proposals “warrant further examination,” but shippers would want to ensure “that anticompetitive practices cannot be continued.”
   “The question also arises why shipping lines cannot use publicly available market information to determine the level of shipping capacity required to meet seasonal demand and industry trends,” the ESC said. It noted that shipping lines have an issue with the ability to ensure a common interpretation across the trades to prevent large-scale over- or undersupply of capacity. But the ESC believes collective interpretation of analyses within consortia (governed by a separate regulation, the Consortia Regulation) or within shipping line alliances, “ought to be sufficient to address this issue.” These questions could be addressed in the future review of the Consortium Regulation of the EC, the ESC said.
   Contrary to the U.S. Ocean Shipping Reform Act, which grants an immunity to carriers to cooperate on both pricing and on joint operations (like consortia and vessel-sharing agreements), Europe has two separate regulations granting an immunity to conferences and consortia.
   The European Commission is expected to produce a “white paper” with proposals for reform in the next few weeks.