Singapore extends liner exemption for five more years

Tuesday, 21 December 2010 00:01 -     - {{hitsCtrl.values.hits}}

Singapore has extended the block exemption for liner shipping agreements for an additional five years to 2015.Singapore’s Competition Act came into effect in January 2006. In July of the same year, the Minister for Trade and Industry issued the block exemption order granting an exemption to shipping lines from section 34 of the act, which governs anticompetitive agreements, decisions and practices.

The exemption was due to expire on 31 December, 2010.

In a statement, the Ministry of Trade and Industry said the Competition Commission of Singapore had assessed that the presence of an extensive network of liner shipping companies played a large part in contributing to Singapore’s status as an international maritime hub.

“This has important flow-through benefits for local shippers and the Singapore economy,” the statement said.

The MTI said antitrust exemptions for liners remained the “international regulatory norm” and that the block exemption would provide “continued certainty” to the shipping industry.

The announcement came after a period of public consultation on the proposal that closed in October.

Views supporting the extension were submitted by APL, the Japanese Shipowners’ Association and the Singapore Shipowners’ Association.

A joint submission from the Singapore National Shippers’ Council and the Asian Shippers’ Council came out strongly against the proposal. “Distortion of the free market is self-defeating. Rather than provide stability, it worsens the boom and bust cycle endemic in the shipping industry,” the shipper councils’ submission said. Legal comments were also submitted by law firm Alban Tay Mahtani & de Silva.

In a statement, the Singapore Shipping Association said it applauded the ministry’s decision.

“The SSA stands by its position that the block exemption will continue to prove beneficial to Singapore and help maintain stability and confidence in the liner shipping industry for it to provide regular, reliable and competitive services to all its customers both locally and internationally,” a statement from the association said.

Asian Shippers’ Council chairman John Lu was not immediately available for comment. In an earlier interview with Lloyd’s List, Mr Lu, who also is chairman of Singapore National Shippers’ Council, slammed the block exemption, saying its extension was “unthinkable”.

Lack of understanding between the shippers and shipping lines – FMC

When freight rates shot up in the early part of the year and many US shippers found it impossible get hold of containers for their export cargoes, there were whispers of collusion and suspicion that lines were reverting to old habits.

But during several months of fact-finding to investigate what went wrong and determine how to avoid future disruptions to the supply chain, no evidence was found of any unlawful practices. The Federal Maritime Commission was not conducting an antitrust probe when it decided to interview carriers, their customers and others involved in ocean transport in an effort to find a way of ensuring there is always sufficient capacity to meet the requirements of US importers and exporters. But if anything that warranted further inquiry had been unearthed, the FMC would have launched a full-scale investigation into anti-competitive behaviour.

That did not happen. What occurred a few months ago was the result of normal market forces, with demand suddenly recovering and supply taking time to catch up.

After such a terrible 2009, when many lines were forced to put containerships into lay-up, there was understandable reluctance to reactivate idle tonnage too fast, just in case the rebound proved temporary. Furthermore, it takes several weeks for vessels that have been fully mothballed to be brought back into service.

But what the FMC discovered was a lack of understanding between the two sides, and poor communication. That is why consortia such as the Grand Alliance, New World Alliance and CKYH Alliance may be asked to provide information on future fleet deployment plans so that there is better advance notice of fleet adjustments.

The FMC also wants to receive transcripts of Transpacific Stabilization Agreement and Westbound Transpacific Stabilization Agreement meetings, or even have staff sit in on some meetings.

That, says FMC chairman Richard Lidinsky, ought to give critics of the TSA and WTSA an assurance that the authorities are keeping a close eye on their discussions.

For those who still think that the container lines fix prices, that oversight should help to set their minds at rest.