European law report - A sea without barriers

For a number of decades, liner shipping companies have transported cargo, generally by container, around the globe on the basis of so-called "conferences", which are agreements whereby these companies fixed prices, agreed schedules and even limited output, regardless of their market shares. Contracts with their customers have often been regulated by these "conferences", as have the terms on which suppliers provide services to them.

Conferences have long been shielded from the full impact of antitrust rules given the particularities of maritime transport.

Yet, the EU Commission's staunch free trade policy could no longer allow the complete exemption of maritime transport services from antitrust. In fact, the new EU competition rules now apply fully to the maritime sector, thus helping to create a level playing field which would result in increased competition that will bring about positive results not only for customers of maritime companies, but also for end consumers of the goods carried by ships.

The Commission has established October 18 as the repeal day of the special exemptions for liner conferences. This means that liner shipping service providers are no longer allowed to create legitimate cartels which fix tariff rates, share markets and restrict capacity. Should liner carriers wish to enter into cooperation in future, they will have a duty of self-assessment in line with competition rules.

Cooperation which infringes EU competition rules will be dealt as any other form of cartel in other economic sectors, without the possibility for the maritime companies to be able to resort to the former special exemptions.

This means that all EU and non-EU carriers, which currently take part in conferences operating on trades to and from the EU, will have to end their conference activities, in particular price fixing and capacity regulation.

Antitrust rules will also apply to "cabotage", which involves the transport of goods between two points in the same country. Tramp shipping services, which refers to unscheduled maritime transport of non-containerised bulk cargo, will also fall under the purview of the EU competition rules.

Thus oil tankers, chemical and agricultural products that are generally carried by tramp carriers, will be affected.

Tramp carriers normally enter into so-called "pool agreements" that involve different ship owners who bring together their vessels in a pool administrated by an appointed entity in order to jointly provide shipping services.

This may involve market sharing, price fixing and other restrictions of competition between the different ship owners and hence to the extent that such pool agreements have anticompetitive effects, they are not allowed under the new competition rules.

In order to assist companies in the transition, the EU Commission has issued guidelines on the application of competition rules in the maritime sector. These guidelines are necessary given that the assessment of whether a particular agreement is in line with competition law requires a combination of legal and economic anlaysis, which the shipping company will have to carry out.

Examples of contracts which may raise competition issues include agreements for the appointment of exclusive agents, those that tie customers through exclusivity obligations or financial inducements to dealing with one carrier or pool for all or a majority of their cargo, or situations where ship managers have access to confidential information from several competing owners or operators.

The Commission enjoys the same investigation and enforcement powers in maritime transport services as in all other economic sectors.

Repealing the exemption will benefit EU exporters by lowering transport prices while maintaining reliable services. This will enhance the competitiveness of EU industry, furthering the Lisbon Strategy.

• Dr Grech is an associate with Guido de Marco & Associates and heads its European law division.

jgrech@demarcoassociates.com