Freight & Trade Alliance (FTA) and the Australian Peak Shippers Association (APSA) continue as the leading industry advocates calling for reform to competition law in Australia in an environment where international shipping lines have significant bargaining power through consolidation and organisation into global alliances.

While Vessel Sharing Arrangements (VSAs) can bring benefits, namely economies of scale and coordination across a global network, FTA / APSA have concerns that increased concentration of the shipping industry combined with the exemptions from Australian competition law provided by Part X of the Competition and Consumer Act has the potential to lead to artificially elevated freight rates, surcharges and landside logistics costs.

INTERNATIONAL OUTLOOK

27 September 2023, the United Nations Conference on Trade and Development (UNCTAD) released their Review of Maritime Transport 2023 providing a series of Policy Recommendations including a focus to ensure gains from competitive liner shipping services are passed on to shippers (exporters, importers and freight forwarders). A specific strategy states 'international development partners should provide capacity building and strengthen the capacity of national competition authorities in the area of marine transport and provide platforms for international cooperation and coordination'.

In line with this approach, a major announcement was made on 10 October 2023 that the Consortia Block Exemption (CBER) no longer promotes competition in the shipping sector and therefore the European Commission will let it expire on 25 April 2024 – further detail available HERE.

Furthermore, members will recall as a part of a focus on competition in global supply chains, the Australian Competition and Consumer Commission (ACCC) announced in early 2022 a new international working group with the competition authorities in the UK, USA, Canada, New Zealand and Australia forming the 'five eyes' alliance.

In response to a recent request for further detail, FTA / APSA received advice that the ACCC is still engaging with their international counterparts, with a particular focus on cartel detection, data analytical tools and a focus on potential collusion in global supply chains given the pandemic-induced disruptions, increased freight rates and price of goods for consumers. The five-eyes shared objective is to expand and improve their detection and investigation tools and techniques to better detect, dismantle and deter cartel behaviour.

WHAT IS PART X?

It is legislation that allows shipping lines to make agreements on vessel sharing and scheduling, which might otherwise breach our competition laws, provided the agreements are registered with the Registrar of Liner Shipping. It was first introduced as a part of the Trade Practices Act back in the 1970s because of concern that geographical remoteness made Australia an unattractive destination for foreign owned shipping lines. Of significant note, no other industry has benefited from such a broad legislated exemption from Australia's competition law.

APSA has been the continuous legislated peak body since 1980 as designated by the Federal Minister of Infrastructure and Transport to protect the interests of Australia's cargo owners and shippers in respect to shipping and international logistics services. This provides APSA the opportunity to negotiate with Conferences, Discussion Agreements and major Consortia on minimum levels of service; the opportunity to negotiate sea freight rates; and ensure that Conferences, Discussion Agreements and major Consortia provide any information reasonably necessary for the purpose of negotiations.

PRODUCTIVITY COMMISSION RECOMMENDATION

Whilst APSA has negotiation rights under the Act, these provisions have failed to give confidence to exporters, importers and freight forwarders of adequate protections from potential anti-competitive practices. Similarly, the European Commission explained its recent decision not to renew the CBER as it did not deliver efficient services, which are the basis for such protection, especially during the two years of the COVID crisis.

FTA / APSA made a formal submission on 11 February 2022 to the Productivity Commission's review of Australia's Maritime Logistics Systems including the following recommendation:

RECOMMENDATION 1 (shipping competition review) – repeal of Part X of the Competition and Consumer Act 2010, with retention of shipper collective bargaining provisions, leaving two options:

(1) foreign owned shipping lines to operate in line with competition laws faced by other businesses involved in Australian commerce; or
(2) if deemed necessary for foreign owned shipping lines to have ongoing protections, expand the role of the ACCC (or introduce a federal maritime regulator) to administer processes to safeguard exporter and importer's interests, in particular, monitoring the appropriateness of shipping line (and contracted stevedore / empty container park) surcharges, fees and penalties.

The Productivity Commission agreed with the FTA/APSA position that Part X is outdated, unnecessary and have recommended it be repealed.

The Productivity Commission expressed the view that determining what, if any, forms of collaboration should be exempt from competition laws should be a matter for the ACCC after a transparent process, and only where they have assessed that the reduction in competition would result in significant efficiencies or public benefits. The Productivity Commission noted existing legislation provides the appropriate mechanism for this assessment through the authorisation and class exemption regimes.

FEDERAL GOVERNMENT RESPONSE

As a part of bi-lateral engagement with the office of the Federal Treasurer, FTA / APSA have been advised that Part X will be incorporated into a wider review of Australia's competition law as outlined in the Treasurer's media release from 23 August 2023 A more dynamic and competitive economy

FTA / APSA representatives met earlier today (17 October 2023) with the lead and executive contingent of the competition law review Taskforce. While the review will be progressed over two years, the Taskforce will be providing continuous advice, rather than a formal report, to the Federal Government.

SHIPPING LINE ADVOCACY

The underlying issue to note is that next year's expiry of the CBER does not mean that cooperation between shipping lines operating in the EU will become unlawful. Rather, it means that that VSAs will be regulated under the general EU antitrust rules ensuring efficient and sustainable transport for Europe. It is acknowledged that this shift to general EU antitrust rules may create a period of uncertainty as shipping lines, shippers, ports and logistics companies as they reflect on their strategies and trading relationships.

In an Australian context, should Part X be repealed, it is essential that mechanisms also exist to ensure VSAs remain as a legal option. As discussed today with the Taskforce, the EU timing provides us with a tremendous opportunity to influence government decisions in determining what life looks like after Part X.

In parallel to our engagement with the Federal Government and as a part of affiliation with international organisations, FTA / APSA have also commenced direct engagement with executives from the World Shipping Council (WSC).

The WSC disagrees with the FTA / APSA recommendation options for a replacement for Part X stating that their member shipping lines require legal certainty through an appropriate class exemption for consortia to take its place, without a legal gap in coverage. WSC also do not believe that a consortia or vessel sharing class exemption is related in any way to charges and fees, as the setting of such charges and fees would be individual carrier activity outside of the operation of consortia and therefore outside of any class exemption. As a general matter, WSC would not seek to retain the rate authority currently covered by Part X.

While a consensus position may not be achieved, FTA / APSA have accepted the WSC invitation to test a collaborative approach via a series of meetings in hope of establishing an agreed industry position to put to the Australian government with the potential of establishing an international standard of best practice.

FTA/APSA will continue to keep members up to date on pertinent developments on this critical reform activity.

Paul Zalai - Director FTA | Secretariat APSA | Director GSF

INTERNATIONAL SHIPPING COMPETITION LAW REFORM – UPDATE 1 : FTA/APSA MEETING WITH TREASURY TASKFORCE