September 2014
Last Call for Liner Exemptions in Australia?
Practice Group(s):
Australia Maritime Alert
Energy, Infrastructure
and Resources
By Richard Arrage and Murray Deakin
Maritime
Transport & Logistics
The Competition Policy Review Panel (the Panel) has recommended the repeal of
the current statutory exemptions for the liner shipping industry, potentially exposing
conference agreements to the full rigour of Australia's competition laws.
Antitrust,
Competition and
Trade Regulation
Members of the shipping industry who may be adversely impacted by this proposed
legal reform have until 17 November 2014 to make submissions to the Panel.
Background
The Prime Minister and the Minister for Small Business announced the Competition
Policy Review on 4 December 2013: the first comprehensive review of Australia’s
competition laws and policy in over 20 years (the Review).
On 27 March 2014, the Minister for Small Business announced the members of the
Panel and released the final Terms of Reference following consultation with the
States and Territories.
The Panel is led by Professor Ian Harper, Partner, Deloitte Access Economics with
panel members Su McCluskey, Chief Executive Officer of the Regional Australia
Institute, Michael O’Bryan, Senior Barrister at the Victorian Bar and Peter Anderson,
former Chief Executive of the Australian Chamber of Commerce and Industry.
The Issues Paper was released on 14 April 2014. Submissions in response to the
Issues Paper were open until 10 June 2014.
On 22 September 2014, the Panel released its Draft Report (the Draft Report).
The Draft Report is wide-ranging and contains many recommendations across the
entire economy. It includes a number of specific recommendations in respect of the
liner shipping exemptions of the Competition and Consumer Act 2010 (Cth) (the
CCA).
The publication of the Draft Report will be followed by a series of public forums in
various Australian States and Territories to discuss the recommendations made in
the Draft Report.
Submissions in response to the Draft Report are invited to be made by 17 November
2014, before the Panel prepares its Final Report which is expected to be provided to
the Australian Government by March 2015.
Last Call for Liner Exemptions in Australia?
The Current Exemptions
Part X of the CCA allows liner shipping operators to enter into agreements among
themselves in relation to matters such as freight rates, the pooling of revenues, the
identification of trade routes and the quantity and kinds of cargo to be carried.
While such conduct might otherwise fall foul of the cartel conduct prohibitions under
the CCA, the registration of such agreements with the Registrar of Liner Shipping
confers upon the liner operators exemptions from those prohibitions, provided the
Registrar is satisfied that there is an overall benefit to Australian exporters or
importers.
The historical justifications for such exemptions included the need to secure stability
of trade and to deliver an efficient supply of liner services to Australia, as well as
avoiding destructive competition.
Recommendations
The Panel has formed the view that while the current system requires the
demonstration of an 'overall benefit' to Australia before an agreement can be
registered under Part X, there is no requirement for an assessment of the competitive
effects of that agreement.
Further, under the current system, the registration process completely bypasses the
primary competition regulator (the Australian Competition and Consumer
Commission (ACCC)) in favour of the Registrar of Liner Shipping, an office
specifically created under Part X of the CCA.
On these and other bases, and subject to a two year transition period, the Panel
recommended in its Draft Report:

the repeal of Part X of the CCA in its entirety

subjecting the liner shipping industry to the normal operation of the CCA,
including the cartel conduct prohibitions

the granting of a new power to the ACCC to grant 'block exemptions' for
conference agreements which contain a minimum standard of pro-competitive
features (but, in the example given by the Panel, not involving a common
conference tariff or the pooling of revenues and losses)

subjecting those conference agreements, which do not have such procompetitive features, to individual authorisations through the ACCC

but alternatively, if the general block exemption power recommendation is not
taken, requiring parties to conference agreements to seek authorisation from
the ACCC on the basis of the 'net public benefits' test employed in other
industries.
Comments
The exemption system, in various guises, has been employed successfully in
Australia since at least 1966, and provides a degree of certainty for shippers and
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Last Call for Liner Exemptions in Australia?
importers (in respect of service levels) and liner operators alike (in respect of
investment levels on Australian routes).
The recommendations of the Panel appear to accord with the general concerns
expressed by the ACCC in respect of the exemptions granted to the liner shipping
industry. However if adopted, the recommendations have the potential to add an
unnecessary level of complexity and bureaucracy to a system which is well
understood and certain in its application.
Industry participants have until 17 November 2014 to consider the recommendations
and make submissions in respect of them. Our team has a breadth of experience in
assisting clients with drafting submissions to the Government and lobbying for
legislative and policy change. Please contact us if you have any questions or would
like assistance with drafting submissions.
Authors:
Richard Arrage
richard.arrage@klgates.com
+61.2.9513.2341
Murray Deakin
murray.deakin@klgates.com
+61.2.9513.2335
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