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December 14, 2005

EC seeks repeal of liner shipping competition exemption

The European Commission is proposing repeal of the block exemption of liner conferences from the EC Treaty competition rules' ban on restrictive business practices.

The current block exemption allows carriers to fix prices and regulate capacity jointly.

The Commission says repealing the exemption will benefit EU exporters by lowering transport prices whilst maintaining reliable services.

The Commission proposal would also bring maritime tramp and cabotage services under the scope of the competition implementing rules (Regulation 1/2003), giving the Commission jurisdiction to apply the competition rules in the sector.

The proposal will now go to the EU's Council of Ministers for adoption by qualified majority and to the European Parliament for consultation. After its adoption the Commission will publish guidelines on the application of the competition rules to the sector.

Commissioner Charlie McCreevy, who is handling this proposal, said "The European shipping industry is strong and has everything to gain from a competitive market. Customers are clamoring for business in this industry to be conducted as it is in all other sectors. I call on the Council to adopt this proposal quickly so that the benefits to the EU economy can kick in."

To allow shipping lines time to adapt to a competitive market and to give Member States time to review their international obligations, the Commission proposes that the repeal of the block exemption should take effect two years after adoption of a Council decision.

The Commission and the liner shipping industry have discussed whether a replacement of the conference system is necessary.

If the current block exemption is repealed, the Commission say it is "minded to issue appropriate guidelines on how to apply competition rules to all forms of cooperation in the maritime transport sector, including information exchange." This would help smooth the transition to a more competitive environment.

The guidelines, which should be brought forward by the end of 2007, would treat issues such as an independent data warehouse, the creation of a trade association and of trade forums, the publication of a price index and common formulas for charges and surcharges. The guidelines will explain how the competition rules apply to the liner sector in general, including timely and regular exchange and publication of capacity utilisation information. As an interim step, the Commission will publish an issues paper on liner shipping in September 2006.

The Commission's proposal also covers tramp and cabotage services. Tramp services are the non-regular, maritime transport of non-containerized bulk cargo, and include economically important services such as the transport of oil, agricultural and chemical products.

Cabotage services are maritime transport services between ports of a single Member State. The proposal to bring these services under Council Regulation 1/2003, the common competition implementing rules, does not involve a change to the applicable law as EU competition rules already apply to the sectors. It rather establishes equality of treatment between these sectors of the economy and all others to which the implementing rules already apply.

Any guidelines would also cover the application of EU competition rules to tramp services. The Commission has already started discussions with industry to better identify concerns and will be offering a study on the characteristics of the tramp shipping market