Tuesday, October 30, 2012

Container Shipping Lines and Freight Forwarders View Anti Trust Changes Differently

New Zealand Considers Imposing Stricter Cartel Legislation
Shipping News Feature

NEW ZEALAND - WORLDWIDE - In a move which will be viewed with trepidation by some shipping interests, particularly the major container lines, last month the Minister of Commerce asked the New Zealand Parliament Commerce Committee to consider proposals to transition international shipping to a normal competition regime governed by the Commerce Act 1986. In effect what this means is that the protection enjoyed by the lines to avoid prosecution under anti trust legislation would be removed. This would mirror decade’s old changes which we have witnessed in the disbanding of the old style conference agreements, their evolution into Transoceanic Agreements and the resultant pig's breakfast of legislation regarding what is a cartel dependent on which route one's freight is destined to take.

Many critics will view the decision, taken following the final report from the New Zealand Productivity Commission’s published in April, as one prompted by the highly financially lucrative prosecutions of freight forwarders and air cargo carriers which we have been witnessing of late. The purpose of the report to the New Zealand Parliament was in fact to study ways in which the country could upgrade and improve the international flow of commercial traffic.

Whilst a move to remove anti trust immunity will worry the carriers, many of whom have long argued that a cohesive joint policy on base tariffs is an essential tool to ensure regular and reliable service levels it will doubtless be welcomed by forwarders and manufacturers alike who will see it as potentially lowering costs. The move has already been welcomed by the Global Shippers Forum with Secretary General Chris Welch speaking of his organisation’s submission to the Commerce Committee, said:

“It is impossible to treat as credible the continuing demands from the liner shipping operators for the continuation of exemption for price fixing on the ground that they are essential to ensure that international shipping lines continue to provide stable and reliable services to New Zealand’s exporters and importers. Especially as the evidence, as conceded by the International Container Lines Committee (ICLC), is that ‘historic conference agreements no longer operate in New Zealand.’”

The GSF submission noted that not all collaborative agreements that do not involve pricing are good for the New Zealand economy, as they can impact on price through capacity restrictions to support higher prices rather than to reduce prices costs by introducing efficiencies. In that respect, with regard to the treatment of Discussion Agreements, GSF maintained that these should be regarded under competition law as ‘rate-making agreements’ and should not enjoy automatic exemption. Chris Welch concluded:

“There were no risks associated with transitioning to a Commerce Act only regime as there are sufficient safeguards built into the Act and the bill to provide sufficient flexibility for international shipping lines to collaborate, in order to provide maximum capacity and frequency of services to and from New Zealand.”

New Zealand authorities feel that they must ensure all their methods of carriage are competitive in a region where shippers have alternative sources of supply and potential export and import routes and to this end driving down or maintaining price levels are considered paramount. In the long term however the lines will always change schedules to maintain profitability in the increasingly competitive ocean freight sector and will only service the country’s ports in a manner which suits their economic needs.