Matriculation No: A0073277Y
No. of Words: 2915 words
Question: The Liner Conference Block Exemption and the Section 34 Prohibition Evaluate the reasons for and against maintaining this block exemption for the benefit of this segment of the shipping industry - is the position taken by Singapore justifiable in light of the experiences of other more mature competition law jurisdictions?
The Minister of Trade and Industry, upon the recommendation of the Competition Commission of Singapore [“CCS”], has the power to make a block exemption order [“BEO”] under s. 36 of the Competition Act [“CA”]. Block exemptions refer to a particular category of agreements which are exempt from the s. 34 prohibition. CCS typically recommends BEOs when they satisfy the criteria set out in s. 41 of the CA, which is essentially the same as the net economic benefit exemption under the Third Schedule of the CA. The benefit of a BEO is that it acts as a safe harbor for agreements of the specified category without requiring the parties to take any administrative action e.g. notifying CCS under s. 44 and s. 45. To date, the Competition (Block Exemption for Liner Shipping Agreements) Order is the only one that has been made in Singapore. It came into operation on 1 January 2006 and will remain in force till 31 December 2015 (after being renewed in 2010). Block exemptions for liner shipping agreements has historically existed in most jurisdictions with competition law regimes. This essay will discuss firstly, the purported benefits that liner shipping agreements seek to achieve and disadvantages that it avoids, secondly, the deficiencies of liner conference agreements, and its declining importance (in part due to the proliferation of liner consortia agreements and individual service contracts), that has led to the removal of the block exemption for liner conferences in the European Union [“EU”]. However, despite the changes made in the EU, Singapore recently renewed its block exemption for liner shipping agreements in 2010. The essay argues that the renewal is justifiable because firstly, the block exemption order in Singapore is quite different from that which was repealed in the EU, secondly, because the long-term impact on the liner shipping industry as a result of the EU’s repeal has yet to be seen. Given that Singapore is greatly dependent on the shipping trade, it may be wise to adopt a cautious approach. II. Net Economic Benefits
The rationale behind the BEO was to ensure that “agreements that promote the rationalisation of liner shipping operations by means of technical, operation and commercial arrangements” are facilitated. The net economic benefits that were believed to result from the BEO are namely, frequency and reliability of services, price stability, and internationally competitive prices. A. Unique Nature of the Liner Shipping Market
Defenders of the BEO for liner shipping agreements have based their claims on the unique nature of the market. Typically, price fixing and capacity regulation are “hardcore restrictions” and commonly viewed as productive of negative effects without any countervailing value to consumers. However, the unique nature of the shipping industry is such that price-fixing and capacity regulation is arguably necessary for the provision of frequent and regular scheduled maritime services. Such services promote international trade by improving the reliability of services, and maintaining price stability. Price stability benefits transport users such as shippers by assisting them for purposes of production and inventory planning. i. Benefits of Capacity Regulation
The regular nature of a liner service suggests that liners have an obligation to sail whether they are at full capacity or not. Additionally, a typical feature of the liner industry was that liners faced unbalanced trade flows (i.e. a larger volume of cargo is carried on the dominant trade route as compared to...
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