The ACCC is seeking comments on a possible class exemption for liner shipping from competition laws, in a discussion paper released today.
Liners that provide cargo shipping services to or from Australia currently enjoy broad exemptions from Australia’s competition laws.
Part X of the Competition and Consumer Act permits liner shipping operators to enter into agreements with each other about commercial matters such as freight rates, the vessels to be used, and the quantity and kinds of cargo carried on particular trade routes.
Part X allows operators to make these agreements without risk of breaching competition laws, as long as the agreements are appropriately registered.
The 2015 Harper Review of competition law found that the liner shipping industry’s exemptions under Part X, put in place during the 1960s, are outdated, unnecessary and should be repealed.
The Harper Review recommended that the ACCC develop a class exemption for liner shipping agreements. This class exemption would only apply to agreements that are not likely to substantially lessen competition or are likely to result in overall public benefits.
A class exemption would help clear the way for repeal of Part X.
“Australia’s Part X regime is one of the most permissive of its kind among developed countries, several of which have recently moved to scale back their own competition exemptions for liner shipping,” ACCC Chair Rod Sims said.
“These sorts of exemptions have become harder to justify, as cargo ships have become bigger and the industry has consolidated.”
“We recognise, however, that some limited co-ordination between liners visiting Australia may be in the public interest, by supporting efficient shipping services. This consultation process will allow us to examine how liners co-ordinate, so we can make sure the proposed class exemption would only apply to conduct that is clearly beneficial,” Mr Sims said.
The ACCC’s ‘authorisation’ and ‘notification’ processes allow businesses to seek legal protection for arrangements that risk breaching competition law. However, unlike with the authorisation and notification processes, a class exemption applies automatically, without the ACCC reviewing specific agreements.
“We are also keen to hear from the industry about whether the class exemption should extend to collective bargaining by cargo owners and their representatives,” Mr Sims said.
More information is available at Ocean liner shipping class exemption. Submissions can be provided to the ACCC until 28 February 2020.
Part X was added to the Trade Practices Act (now the Competition and Consumer Act) in the 1960s to address a concern that Australia, being geographically remote, was not sufficiently attractive as a destination for international shipping lines.
Part X provides for liner shipping operators to register agreements with the Registrar of Liner Shipping. Registration exempts agreements from the cartel conduct prohibitions and sections 45 (contracts, arrangements or understandings that restrict dealings or affect competition) and 47 (exclusive dealing) of the CCA.
This means that liner shipping operators are able to enter into agreements with each other about freight rates, routes and other commercial matters without risk of breaching Australia’s competition laws.
The European Union, Hong Kong and New Zealand have moved away from regimes that resemble Part X in favour of limited exemptions for co-ordination where the risk to competition is lower and public benefits are more likely.
It is a matter for the Government to decide whether and when to seek to repeal Part X.
In 2017, the ACCC was given the power to make ‘class exemptions’ for specific types of business conduct that may otherwise raise concerns under competition laws. This new power is in addition to the ACCC’s existing authorisation and notification processes.