Not best year to measure conference ban

Not best year to measure conference ban       In the summer of 2008, ocean carriers had quietly resigned themselves to fate.
      Come the fall of 2008, they would no longer enjoy antitrust immunity on collective rate-setting in trades to and from Europe.
      Then the financial world caved, ocean freight volume and rates caving along with it, yet still things were strangely silent. Though the credit-induced financial crisis had nothing to do with the European Commission's decision three years ago to end the liner antitrust exemption, it seemed a cruel coincidence that both issues should confront carriers at the same time.
      As the economic crisis and carriers' own crisis deepened over winter and spring, still there was a collective public silence on the issue. No blame-apportioning nor finger-pointing, until Jacques Saad', chairman of CMA CGM, said in the summer that the new regulations on carriers sure weren't too helpful during a historic recession.
      Then C.C. Tung, chairman of OOCL parent OOIL, wrote in a September editorial in Lloyd's List that 'the existing platforms for discussion of industry issues should be extended further,' and that 'our goal should be to work with governments to provide our industry with the ability to collectively discuss capacity management and rationalization, for a period of, say, one year.'
      Finally the silence ended and out came the sentiments that most people knew the carriers were feeling. It was hard not to see this all coming. After all, when American Shipper met with C.L. Ting, OOCL's managing director of trade management, in June 2008, he foretold a future with less stability for the industry. (October 2008 American Shipper, page 56).

Ting

'The time from the order of ships to delivery is three to four years,' Ting said. 'That four years is very difficult to predict. In good times, like the last four years, ship owners get bigger ships. But if you don't have the ability to understand supply and demand, and each carrier just looks internally and decides to buy ships, you'll have extreme cycles. The booms will be bigger and the troughs will be deeper.'
      Pretty prescient.
      He also said: 'If you look at the short-term, you don't see why conferences were there for 100 years. Stability was there. Our business plans and transparency brought stability.'
      For years, shippers and carriers in Europe fought over that concept ' that conferences brought stability ' through the European Shippers' Council and the European Liner Affairs Association. We've covered the battles extensively in these pages.
      Not that the disagreements are finished, but it is interesting to note a brief period of d'tente between the two sides over the EC's recently extended Block Exemption Regulation for liner carriers. In late September, the EC extended the regulation through 2015, giving carriers the continued ability to charter space on each other's ships. The EC last fall eliminated the carriers' rights to collectively set rates under the same regulation.
      Both the ELAA, now an information-gathering and disseminating body, and the ESC seemed O.K. with the exemption extension. The ELAA said the regulation that passed was better than the initial extension draft drawn up a year ago. The ESC said it is 'fully supportive of consortia' in areas where competition is not reduced and customers can benefit from the effects of the consortia.
The carriers' acceptance of the extension comes despite the fact that the EC has reduced the market share threshold for consortia from 35 percent to 30 percent. That doesn't mean that a carrier alliance that has more than 30 percent of the market share in a certain trade to or from Europe must be broken up ' it simply means that alliance has stricter self-assessment duties in case there's a chance the regulation is being violated.
      The ESC said it is fine with this setup.
      'Under such circumstances, the members of the consortium would ' just like any other undertaking in a similar situation ' need to self-assess compliance with the competition rules,' the shippers' council said.
      But its support is contingent on the acceptance that the greater the market share an alliance has, 'the greater the risks of restriction of competition and potential breach of EU competition law.'
      Still, the acceptance from both sides is a positive sign, perhaps part of a wider realization that some carriers are precariously perched while also recognizing that carrier antitrust immunity won't ever again be a given.
      On the other hand, the ESC ended its statement on the regulation extension by saying: 'ESC remains convinced that removal of the (block exemption regulation) in the future would make the issue even more clear, with all self-assessments being made on the basis of compliance with the competition rules under the Treaty of Rome, without reference to any market-share thresholds.'
      Though the extension in Europe stretches for more than five years, the battle lines are being drawn in other parts of the world ' most notably in Asia, where the Asian Shippers' Council sees carriers dinging export shippers with accessorial charges that import shippers often don't see or hear about.
      The comments from carriers in recent weeks about preserving their right to collaborate can then be seen in two lights:
      ' They seemed timed to underscore how fragile the industry currently is ahead of the EC extension vote.
      hey seemed aimed at maintaining control of the trades that aren't currently under the anti-competition spotlight.
      Going back to Ting's comments to American Shipper last year, he said he worried that without conferences, there would be 'no structure.' And he's been largely right. There have been wide-scale rationalizations of services, follow-the-leader rate hikes and peak-season surcharges, hard-to-follow carrier partnerships that extend beyond the normal, recognizable alliances.
      But has it made things more competitive? After all, that was what the EC set out to do when it banned collective rate-setting. Are shippers in a better position than they were a year ago? It's literally impossible to determine this year, given that the drop in demand and rates has made this a shippers' market whether or not the EC banned collective rate-setting a year ago.
      The ELAA, in statistics released in mid-September, said that Asia-to-Europe trade was off 17 percent in July, and that was a relative improvement over the first half of the year. With that kind of poor performance, how can the effect of the rate-setting ban be understood?
      The true test of the regulation will come in the years ahead, when volume rebounds.