UNCTAD urged to review liner alliances

One of the best-known authorities on liner shipping regulation today calls for an international body to look into the power of container alliances.

Professor Mary Brooks from Rowe School of Business at Dalhousie University will shortly give a speech at a conference organised by the Federation of European Private Port Operators (FEPORT) in Brussels in which she will hit out at the lack of universal liner regulation and warn on the growing strength of liner alliances.

Brooks, a Canadian academic, became the first women to win an Onassis Prize this September. At the FEPORT event today she joins a growing list of people hitting out at the power of the three leading container alliances who control the majority of the container market.

“If there is political will and a champion, there is the opportunity for a global filing platform for industry agreements that will make regulation of [cooperative working agreements] fair and transparent,” Brooks is set to say in a speech seen by Splash. The professor, who is also a published author, believes a body such as the United Nations Conference on Trade and Development (UNCTAD) could fulfill this liner alliance supervisory role, but she will stress today that it will need to be accompanied by international agreement on when an alliance becomes a de facto merger.

“There is no consistency in regulation across the countries noted with two broad approaches and harmonisation has not progressed well since I studied it in 1998 and published Sea Change in Liner Shipping in 2000,” Brooks will tell delegates later this morning in the Belgian capital, adding: “Regulators have missed a multilateral opportunity but digitalisation affords a new chance to fix this.”

Brooks will outline in her speech how Australia and Hong Kong have recently updated their legislation on liner agreements, while the EU and Japan have stayed the course set they set in prior years.

“Canada’s legislation is protecting alliances by virtue of antiquated filing arrangements. US regulation is overdue for review,” Brooks will say, poining out that there has not been confirmed reform or regulatory reviews in South Korea, China, or the US in the last five years.

Attending the same event in Brussels today is Olaf Merk, the lead author of a 127-page report entitled The Impact of Alliances in Container Shipping, published by the International Transport Forum (ITF) earlier this month. The report has called upon the European Commission to ensure the EU Consortia Block Exemption Regulation for liner shipping is not extended beyond its current timeframe extending to April 2020, a topic that will be debated keenly today.

“Alliances could raise competition concerns in what has become a concentrated market,” the report stated.

When the European Commission sought public consultation on the evaluation of the consortia block exemption regulation, Professsor Hercules Haralambides from Erasmus University in Rotterdam submitted a paper, which noted: “At the time of writing, three alliances carry 80% of global trade. Such consolidation, in an industry that is already highly concentrated, is bound to finally attract the scrutiny of the regulator who, with the final consumer in mind, is likely to encourage more competition rather than further consolidation. If this happens, i.e., if container shipping becomes more open and competitive in the future, and if alliance agreements regarding vessel sharing, investment planning, etc. are scrutinized more closely for their compatibility with competition law, as I expect, the joint filling of the ship will become more difficult and ship sizes shall by necessity decrease, together with an increase in the number of ports of call. Low prices would then be achieved through more competition rather than big ship sizes. This is the more so when it is doubtful if the economies of scale in shipping are passed on to the final consumer, as required by the consortia block exception from the provisions of competition law in Europe.”

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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