Press release

In its response to the European Commission’s guidelines on the application of competition rules to the liner shipping sector, ESC has sought changes that prevent any misunderstanding by the carriers as to what the rules allow.

Overall, ESC has supported the guidelines because it believes the carriers need some things spelled out about the law. There were a number of areas, however, that ESC thought could be misinterpreted and lead the carriers to believe that a system of information exchange could be permitted which was based around an objective which ultimately reduced competition.

“We are dealing with an industry that has no experience of working in a truly competitive environment” said Nicolette van der Jagt, ESC’s Secretary General. Van der Jagt added, “The lines have made joint decisions for decades; they have collectively sought to ensure that jointly they do not over-supply the market; they have never made their own decisions without this objective in mind. This industry therefore needs guidance as they make the transition to a competitive industry based on independent thought, independent analysis, and independent action.

“In referring to systems of information exchange, the ‘Guidelines’ can only refer to those that do not result in a reduction of competition: this is the law. Given that it was the conclusion of the European Commission this time last year (in its ‘Issues Paper’) that the system of information exchange proposed by the European Liner Affairs Association (ELAA) would enable collusion between the lines to manage capacity, keep rates high, and reduce competition, any reference to the same system as proposed by the ELAA should either be removed from the text of the Guidelines or it should be made clear that they are not acceptable under Community competition law.

“The ELAA proposed information exchange would result in a reduced level of competition than there would be without it because carriers would be given sufficient information as to accurately assess what their competitors were going to do, because they all share the same objective – to keep rates up by not over-supplying the market.

“The system would effectively monopolise the provision of volume data, capacity data and price indices. Recent information in all these areas would be collected from every transport document (e.g. Bills of lading) on every trade from every line: combined with publicly available information on capacity forecasts, the results and analyses would be discussed so that only one set of conclusions could possibly ever be reached. The lines know each other so well – and still co-operate with each other in alliances, consortia and liner conferences elsewhere in the world, that each will be able to anticipate their competitors’ behaviour and align their conduct accordingly so as to ensure the supply-demand balance is restored if necessary.

“There is nothing wrong in an information exchange which is used to work out how to compete more effectively and beat the competition. This is what other industries do; this is what we want the liner shipping sector to do.”

“The text needs some subtle amendments or else it risks sending the carriers off on a course of exchanging information that is likely to be challenged in the European courts and more significantly does not help deliver the high quality customer service levels that removal of Regulation 4056/86 should bring.”

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