Box lines call for shipper support on consortia rules

Janet Porter - Wednesday 15 October 2008

CONTAINER lines are calling on shippers to join them in a united effort to persuade Brussels to drop a controversial proposal that would tighten up the rules covering shipping consortia. 

The liner industry “needs your support”, shippers attending a forum in Oslo tomorrow will hear. 

The plea to shippers and other stakeholders comes at a pivotal time for the container trades as the 130-year old conference system ends Friday night. 

Box lines and their customers have been at loggerheads for almost two decades over the conference practice of joint pricing, and have rarely shared a common platform. 

But European Liner Affairs Association executive director Chris Bourne will explain why lines think amendments drafted by the European Commission to the current consortia regulation could be so damaging for both. 

Addressing Shipper Forum 2008 organised by the European Shippers’ Council, Mr Bourne will call for the two sides to finally put aside past differences and work together to achieve an acceptable outcome. 

What has upset ELAA members are proposed revisions to the current block exemption for liner shipping consortia that could lead to the termination of some co-operative arrangements which are designed to cut costs and improve service levels without reducing competitiveness between carriers. 

The regulatory changes coincide with a severe downturn that is forcing lines to “batten down the hatches” and brace for “a rough ride ahead.” Carriers are preparing to withdraw or amalgamate services, return ships to charterers, or sell them for scrap, as freight rates and profits fall. 

From the lines’ point of view, the dissolution of conferences “could not have come at a worse time,” Mr Bourne will claim. For customers, the end of their long campaign for abolition will set the scene for a return to more normal conditions. 

Shippers have broadly accepted consortia as an effective way of improving efficiency through arrangements such as vessel sharing or slot exchanges, without any restraints to trade. 

But in a recent statement, ESC secretary general Nicolette van der Jagt noted that “an interesting and crucial debate” was beginning over whether consortia should be bigger in scope, more inclusive, or restricted. 

Although the ELAA wants to work with the ESC now that conferences are being outlawed, the shipper organisation still harbours suspicions, as was apparent at the last Shipper Forum in Lisbon when Ms van der Jagt said it was “imperative that the new era of competitive liner shipping is not impeded by any vestiges of the conference system,” and went on to warn that “the carriers are the same, and many of the people that supported the liner conferences and the cartelist ideology remain active within the industry.” 

As ESC members gather in Oslo, Mr Bourne will again be stressing that lines compete fiercely against each other, whether or not they co-operate through cost-saving activities that lower overheads. 

What has so alarmed the ELAA are two clauses in a draft of a block exemption for consortia that would come into force in 2010 when the current regulation expires. 

These state that “the market shares of carriers that provide services both individually and within a consortium on the same relevant market have to be aggregated”, and that “market shares of consortia operating in the same relevant market and interlinked by common membership have to be aggregated.”
A proposed marketshare threshold has also been set at 30%, lower than the level now permitted for non-conference lines. Yet the industry has forged many links between alliances, or between individual consortium members and other lines, as every effort is made to cut costs, which would breach that ceiling when combined. 

The ELAA claims that aggregation assumes that lines act as one, whereas in reality “they compete like crazy”. 

The industry “will increasingly need consortia in these troubled times,” says Mr Bourne who is asking for the backing of shippers “to ensure we have a meaningful block exemption.”
Send to Colleague Printer Friendly Format Email the Editor