On 25 September 2006, the EU Competitiveness Council of Ministers approved the adoption of the EU Commission’s proposal to repeal Regulation 4056/86 exempting liner shipping conferences from the effects of competition law. Under what is called the BLOCK EXEMPTION, carriers have been able to jointly regulate capacity and fix prices, practices usually prohibited by European competition law.

The approved proposal removes the BLOCK EXEMPTION from October 2008.

How does the block exemption work?

As background, the EC Treaty prohibits practices within the EU which have an adverse affect on competition.

The EU Commission has exempted whole categories of agreements by using ‘block exemptions’. A block exemption means that any agreement falling within its terms is deemed compatible with competition law.

Regulation 4056/86 is the European legislation containing the block exemption for liner shipping conferences.

What is a liner shipping conference?

Since the 1870s, shipping companies have organised themselves into ‘liner conferences’ to regulate prices or control capacity. Regulation 4056/86 allows liner conferences to continue to coordinate timetables, control supply and regulate freight rates.

Why remove the block exemption?

The Commission believed that as 40% of the EU’s external maritime trade is transported using liner shipping it plays a being a vital role in the economy of the EU. The Commission therefore launched a three-year investigation into the liner conference block exemption. The conclusion of this report was that price agreement is no longer a necessity in the current market and that both the industry and consumers would benefit from more competitiveness.

When will this happen?

The liner conference exemption will continue in operation until October 2008. From this date all shipping companies operating routes into and out of Europe will no longer be able to operate in conferences that fix price and capacity. This will apply equally to EU and non-EU based carriers. Liner shipping outside of Europe will remain unaffected.

The result of the above is that each carrier is now able to introduce an independent tariff, surcharge and fee structure. Changes being made will include Terminal Handling Charges (THCs) in each port, review of the current BAF formulae and the reassessment of the various surcharges being applied on all tradelanes.