The European Commission has adopted a white paper suggesting more competition is needed in the maritime sector. The white paper is the second step in an EU review which should culminate with concrete legislative proposals in 2005. Any proposal must then be decided upon by the EU member states. If approved, the new legislation would effect the entire EU/EEA area. Interested parties may submit comments on the white paper before 15 December 2004. The white paper may be downloaded from: http://europa.eu.int/comm/competition/antitrust/others/#review
The maritime transport sector has for many years enjoyed a more relaxed European competition law regime. Regulation 4056/86 grants liner conferences a generous exemption from the application of competition law. Through an exceptional block exemption, liner conferences are allowed to fix prices and regulate capacity; practices that would otherwise be considered serious infringements of European competition law. In addition, Regulation 4056/86 fails to grant the Commission enforcement powers with respect to cabotage and tramp services, leaving these important sectors without clear European competition law supervision.
In the Commission’s white paper, drastic changes are proposed to the existing regime. The white paper concludes that the block exemption for liner conferences can no longer be justified and calls for its complete withdrawal. However, the possibility of replacing the current exemption with a less comprehensive one is not excluded, and the views of third parties are sought with regard to replacement alternatives.
With regard to cabotage and tramp services, the white paper points to the fact that the current exclusion from enforcement regulation drastically curtails the ability of the Commission, national competition authorities, and national courts to enforce European competition law. According to the white paper, this anomaly should be remedied by making both cabotage and tramp services subject to the Commission’s enforcement powers.
The Commission’s white paper proposes sweeping changes about which all shipping companies should be aware. The proposed abolition of the liner conference block exemption would entail a drastic change in the current shipping market and has been characterised by some as a "leap in the dark". The proposed extension of the Commission’s enforcement powers into e.g. the tramp services sector will necessarily result in closer scrutiny of previously untested cooperation agreements between owners, e.g bulk shipping pools, and it is unclear whether such arrangements would be permitted to continue.
In preparation for the upcoming changes, shipowners should take a careful look at how they currently cooperate with each other in the market, in order to ensure full compliance with existing requirements. If granted the requested enforcement powers, the Commission should be expected to focus on existing cooperation agreements. The fact that cooperation has been open and ongoing for a long time will not provide refuge from intervention. As it is no longer possible to apply to the Commission for individual exemptions or regulatory pre-clearance, shipowners and their legal advisers are now themselves responsible for ensuring compliance.
The Commission has, however, signalled that it may issue a notice on how it intends to apply European competition law to tramp pools before initiating enforcement actions and this initiative may provide a welcome guidance in this area.
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