EU Competition Policy and Liner Shipping Conferences

Liner services were developed in the latter half of the nineteenth century when reliable steam power made it possible for the first time for shipping companies to provide regular scheduled services. The provision of scheduled services created a problem for shipping companies, since the failure to co-ordinate such services often led to the bunching of arrivals in ports, and competition for cargo among rival firms proved destructive owing to the predominance of fixed costs in liner shipping operations. The problem was solved by self-regulation through the creation of cartels known as shipping conferences. Liner shipping conferences were among the earliest forms of cartels in international trade. They were widespread by the turn of the century and covered most international trade routes by then. A conference agreement is an agreement among scheduled carriers on a particular trade route to restrict competition among themselves by setting mutually agreed freight rates and conditions of service. Throughout their history shipping conferences have been free from economic regulatory oversight until quite recently, except in US trades where they have been subject to regulation since 1916, first by the United States Shipping Board, then by the Federal Maritime Board, and currently by the Federal Maritime Commission (FMC). Major European shipping nations refrained from their regulation, despite the concerted practices of conferences being in conflict with their domestic competition law, partly because the enforcement of national legislation would have resulted in jurisdic tional disputes and raised issues of international comity, and partly because public inquiries into the workings of the conference system found that conference practices worked in the interests of trade and, on the whole, benefited both carriers and shippers (FMC, 1989). This policy note discusses the application of European Union (EU) competition law to shipping conferences, and in particular to conference agreements covering North Atlantic trades. This is proving to be a highly controversial issue and the outcome of regulatory cases now before the European courts could possibly seal the fate of the conference system in EU trades, and therefore could have a profound effect on the future