SHIPPING | Carriers treading fine legal line in efforts to restore revenue, warn legal experts

CONTAINER lines are treading a fine legal line in their efforts to restore revenue and return to profit, some lawyers are warning.

Freight rate surcharges that nearly every carrier has applied in recent months could be viewed as suspicious. So could slow steaming, which absorbs ship capacity, if all lines are following a similar strategy.

The advice to ocean carriers to think very carefully about how their behaviour might be interpreted by customers or regulators comes nearly two years after the container shipping industry lost its antitrust immunity in Europe and the conference system was outlawed.

In particular, announcements about intended ancillary rate increases or future ship speeds could be seen as market signalling, said Norton Rose associate Ian Giles.

Although anything said in a public forum or through the media is likely to be regarded as less serious than a private exchange, the commission could nevertheless consider such actions as a potential infringement.

Addressing a seminar on European competition law jointly sponsored by the European Maritime Law Organisation and the Baltic Exchange, Mr Giles reminded shipowners that Brussels has no sympathy whatsoever for crisis cartels, as sponsors of the proposed Baltic Max Feeder scheme discovered. German owners last year dropped plans to collectively withdraw ships from the charter market in a bid to force up rock-bottom rates, soon after the European Commission had launched an investigation.

In preparation for the end of conferences, Brussels provided containership operators with guidelines setting out what would and would not be permitted in the new regulatory environment on, for example, exchange of information about freight rates or cargo liftings.

But these guidelines should not be regarded as a safe harbour, said Mr Giles, with the threshold set very low as other industry sectors have discovered.

Legal experts are telling shipowners to keep a close watch on the aviation and freight forwarding industries, both of which have come under scrutiny from antitrust authorities.

The block exemption from EU competition rules was removed in October 2008, and legal cartels such as the Far Eastern Freight Conference and Trans-Atlantic Conference Agreement were closed down. Since then, many container lines have been fighting for survival, a direct result of the recession rather than regulatory changes, and have had little cause to worry about another antitrust probe.

But should Brussels decide to take a look at the industry, questions could be asked about how lines had managed to raise freight rates so dramatically at a time when the global economy was still struggling to recover from last year’s slump, said Mr Giles.

Regulators would have to decide when it is acceptable for lines to ‘follow the leader’ in lifting freight rates or taking some other measures to restore the bottom line, and when actions look like concerted practice.

Should a complaint be lodged that the European Commission decided to pursue, it probably would not be hard to put together a prima facie case alleging possible antitrust infringements, according to lawyers.

However, a fact-finding exercise by the Federal Maritime Commission after complaints from shippers about ship space and container equipment shortages has uncovered no evidence of collusion in the US trades.

The liner trades are not the only maritime sector that needs keep a close eye on developments in Brussels, said Luis Ortiz Blanco of the Spanish law firm Garrigues. The transfer of some responsibilities from the transport to competition directorate could have far-reaching consequences, especially as far as state aid is concerned.

While it is too early to tell exactly how this shift of competences will affect shipping, Mr Ortiz Blanco said the competition directorate was likely to apply state aid rules in an orthodox way, with no room for manoeuvre, in contrast to the transport directorate that had been willing at times to interpret the law more flexibly.

He also said rules on tonnage tax could be tightened up by the EU’s competition authorities.

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