Competition Policy Review Draft Report makes recommendations concerning shipping industry

22 September 2014
by Stuart Hetherington

In brief - Review Panel recommends repealing Part X of Competition and Consumer Act (CCA)

The Competition Policy Review Panel has recommended that the shipping industry be subject to the normal operation of the CCA and that the ACCC be given power to grant block exemptions from cartel conduct prohibitions.

Recommendations related to Liner Shipping Exemption

The Competition Policy Review Panel released its Competition Policy Review Draft Report September 2014 on 22 September 2014. Submissions on it are due by 17 November 2014 and the final report is to be provided to the Australian government by March 2015. 
 
The purpose of this article is to summarise what is set out on pages 236 to 240 of the draft report, dealing with Liner Shipping Exemption under Part X of the Competition and Consumer Act 2010.

Agreements between liner shipping operators registered with Registrar of Liner Shipping 

As explained in the draft report, Part X of the CCA allows liner shipping operators to enter into agreements amongst themselves in relation to the freight rates to be charged, and the quantity and kinds of cargo to be carried, on particular trade routes and to register those agreements with the Registrar of Liner Shipping. Such registration confers an exemption from the cartel conduct prohibitions and section 45 and section 47 of the CCA. 

Review Panel recommends that ACCC be given power to grant block exemptions

In its recommendations, the Panel has suggested that Part X should be repealed and the shipping industry should be subject to the normal operation of the CCA. 
 
However, it is suggested that the Australian Competition & Consumer Commission (ACCC) should be given power to grant block exemptions and that in consultation with the shipping industry, the ACCC should develop a block exemption for conference agreements that contain a minimum standard of pro-competitive features. 
The Panel gave as an example for such block exemption: 
 
...conference agreements which coordinate scheduling and the exchange of capacity, while allowing confidential individual service contracts (ISCs) and not involving a common conference tariff and pooling of revenues and losses could be eligible. 
 
The Panel went on to suggest that other forms of agreement that do not meet a minimum standard of pro-competitive features should be subject to individual authorisation. 

Need for transitional arrangements for existing agreements

The Panel acknowledged that transitional arrangements for existing agreements would be necessary and considered that a two year transition should be sufficient. It also suggested that if a block exemption power is not introduced, it would be preferable to require conference agreements to seek authorisation by the ACCC on the basis of the normal net public benefit test. 

Earlier calls to repeal Part X of Competition and Consumer Act

In making those recommendations, the Panel noted that in 2005, the Productivity Commission recommended that Part X be repealed and replaced with ACCC authorisation for liner shipping agreements. It also referred to the fact that that recommendation had been repeated in the 2012 joint Australian - New Zealand Productivity Commission study Strengthening trans-Tasman economic relations. 

Regulation of liner shipping in EU and USA

Reference was also made to the European Union and United States approaches to the regulation of liner shipping. In relation to the former, the Panel referred to the block exemption which had been permissible prior to 2006 but which was removed in that year, making liner shipping subject to the general provisions of EU law. 
 

This note just speaks broadly and for general information and is not intended to be comprehensive. You should not rely on this as a final statement or as advice about your own situation.