August 2010
GSF Summary Response to APEC study on Non-Ratemaking Agreements
The Global Shippers Forum (GSF) has long supported policies that advance and foster competitive ocean transportation services and customized economic partnerships between liner operators and their customers.
The GSF believes that anti-trust immunity as it relates to the ability of liner carriers to benchmark, discuss, set or fix rates, service terms and/or surcharges, is not a necessary and should be terminated. Governments are encouraged to remove anti-trust immunity for the liner shipping sector, in order to establish transparency and to introduce market based principles/
Non-rate making vessel agreements have been acceptable to shippers in principle provided they can demonstrate benefits to shippers in terms of reduced costs and enhanced efficiency. They have been seen historically by shippers as a better alternative to conferences because they are not allowed engage in the anti-competitive cartel activities described above.
Nevertheless, such horizontal agreements between competitors must be strictly governed in order to ensure such co-operation remains operational and technical in nature; neither should theyprevent competition through the creation of market dominance on any trade lane or within any specific market.
The greater the degree of transparency in the agreements, the greater confidence there is likely to be among shippers, authorities and carriers alike that the agreements do not constrain competition or breach competition rules, and that any challenges will be far fewer.
Guideline 1
Disagree
Formal exemption of non-ratemaking agreements from the general provisions of competition rules
The GSF believes that there is no need for a formal exemption granted from the general provisions of competition rules (where these exist) for all non-ratemaking agreements. Such an exemption would imply that non-rate-making liner shipping agreements are beyond the law, regardless of their impact on competition and the customers of liner shipping operators.
Where automatic exemptions are granted, the rules and conditions for those exemptions must be spelled out and defined for the purposes of legal clarity. A presumption of no adverse impact on competition still remains until or unless any non-ratemaking agreement was challenged by the competition or other appropriate authorities.
Guideline 2
Agree
Confidential filing of all non-ratemaking agreements should be supported.
The GSF agrees on the condition that the purpose of filing agreements should include greater transparency of the nature and scope of such agreements, as well as the establishment of a record of the agreements which could assist the competition authorities should there be a need to investigate further the impact of such agreements.
Guideline 3
Agree
No setting of pre-defined market share thresholds
Market share thresholds merely provide a benchmark below which market dominance is unlikely to be an issue. It does not presume that any agreement is in breach of competition rules or not.
Without an automatic exemption (guideline 1) there would be no need for potentially confusing qualifying rules and conditions, such as the setting of market share thresholds.
Guideline 4
Agree
The duration of agreements to be at the discretion of the carriers themselves
Provided the agreements were not restrictive of competition, GSF believes the agreements can be indefinite; however, there should be a formal process of regularly updating the authorities on the details and impacts of the agreements.
Guideline 5
Agree
Sharing of information filed between member states of APEC, and eventually being made public
Consortia agreements, alliances, vessel sharing, slot sharing, equipment pooling, facility sharing agreements and the like, are increasingly complex in liner trades today. Untangling the web of agreements between the different lines, alliances and consortia can be extremely difficult at the best of times.
If the appropriate authorities are to be able to investigate any challenge to an agreement they need the appropriate basic facts concerning the agreement. Such agreements normally stretch across international and legislative boundaries and therefore APEC member countries should share the information they have on the agreements. Ideally the filing of information should be standardised to aid consistency, uniformity, simplicity and administrative burdens on the carriers concerned.
Some of the details of an agreement should also be made public so that anyone concerned about an agreement may conduct their own preliminary assessment using the same information available to the authorities before submitting an official complaint. This would therefore help to ensure only genuine complaints are made which are supported by more than mere circumstantial or anecdotal evidence.
Conclusions
Maintaining competition and choice based on price and service differentiation remain the key measures of what will be acceptable to shippers. Liner shipping companies should be allowed to co-operate in non-vessel sharing agreements if they believe this gives them greater scope for providing the customer with the range of services and service quality that the customers require.
Non-ratemaking agreements in the liner shipping sector can achieve operating efficiencies, an extended range of services, competition and lower freight rates or door-to-door prices. They have been seen historically by shippers as a better alternative to conferences because they are not allowed to participate in anti-competitive activities.
Such agreements between competitors must, therefore, be monitored for anti-competitive behaviour. Competition laws are required to determine what is and what is not anti-competitive. Where competition law governing the liner shipping sector is absent, there should be urgent attention to establishing it: global trade is too important and complex to be left outside of the law.
Exemptions from competition laws should be avoided: after all, if non-ratemaking agreements are either not restrictive of competition or justified by the efficiencies they may provide to their customers, then there should not be any need for an exemption.
Please send any comments or request for further information to Mr John Y Lu, Chairman of the Asian Shippers’ Council (contact details below),as the primary contact on this issue, for and on behalf of the Global Shippers’ Forum.
Asian Shippers’ Council
Mr. JohnLu
Email:
Website:
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