Document

In the 2001 White Paper on EU Transport Policy, the European Commission stated its intention to develop a legislative initiative to harmonise and make compulsory minimum contract clauses in road transport to protect road hauliers from sudden and steep increases in fuel prices. The idea behind this is that sudden fuel price increases - in a very competitive market - would incentivise road hauliers to circumvent social and safety legislation in order to avoid loosing their clients. It has come to our attention that the European Commission has started consulting the Member States and the road transport sector about the existence and desirability of introducing these contract clauses.

ESC position

Minimum contract clauses to oblige companies to compensate for changes in fuel prices or other costs would hamper the workings of the internal market and it would put a brake on the positive effects of competition. A mandatory standard contract would also create unnecessary administrative burden as well as an enforcement problem. The problems the sector is struggling with will only be perpetuated by protective measures such as these.

Considerations

Internal market and competition

In the European Union, we have opted for an internal market where companies compete with each other. Every company has to deal with cost variations. These form part of normal business risk. The internal market is characterised by free price negotiations between market parties. It would constitute a fundamental mistake to impose legal obligations concerning the way to deal with cost variations, reregulating a liberalised market - with all its advantages - and going back to the time of price-fixing. ESC would like to point out that these clauses - if mandatory - would constitute an infringement of Regulation 4058/89, which provides for free price fixing between the contracting parties in carriage of goods by road.

Deregulation in the past decade has led to much more efficient road transport. Road hauliers were faced with increased competition and had to improve their service, cut costs and avoid unnecessary kilometres to be able to compete. This is good for the cost price of shippers, the end price of consumer goods, and therefore for the economy. Less vehicle kilometers also has a positive effect on road safety and the environment.

Overcapacity

Regulating the market by intervening in contract freedom helps the less well-performing companies survive. These are the companies in fact, which are most likely to infringe the law, and this legislative action would help those who do to continue to do so. Better performing companies are punished by this. The overcapacity that exists in a lot of market segments is being maintained in this way, missing a chance to improve service performance and compliance with safety, environmental and social legislation.

Law enforcement

The idea of mandatory compensation stems from the perceived ‘need’ of road hauliers to circumvent social and safety legislation in order to remain competitive. First, competition, no matter how fierce, can never be an excuse to break the law. Secondly, if companies suffer distortions of competition because their competitors do not respect EU driving hours’ rules or other legislation, then it is up to the Member States to better enforce this legislation. To create new legislation and new administrative burden because other legislation is not adequately enforced is like buying a new car because the old one ran out of petrol. That will not help achieving the Lisbon objectives, we need less and better legislation that is adequately enforced.

What should the sector do?

Road hauliers should focus on improving the price/quality relation of their service, cooperate more with each other, and/or specialise to provide a service with more added value. They must withstand any customer pressure to infringe the law.

What should our governments do?

The government establishes the rules of the game and should enforce them. Investing in good law enforcement is very important. It reduces distortions of competition since it will become more difficult for a haulier to infringe the law, which is good for the haulier that does respect it. Law enforcement should be harmonised at European level, to avoid distortions of competition between countries.

Copy of letter to Ms Loyola de Palacio Vice-President European Commission

For further information contact: Nicolette van der Jagt, Secretary General of the ESC - Brussels 00 322 230 2113