Life after conferences

Life after conferences

On Oct. 18, liner shipping conferences will become illegal within the European Union. What will be the implications of this historic change in the regulation of a critical part of global trade and the myriad international supply chains that it feeds?

Members of the European Liner Affairs Association accounted for 88 percent of the world's container vessel capacity at the last count. When I talk with ELAA members regarding the end of the liner conference system for European trades, I have to remind myself this is a system that the industry has worked with for 133 years. We have to carefully assess what this change means to carrier and shipper alike.

We have been conducting seminars and discussion forums for members to explain what the abolition means and how the industry will operate within what we call the European Commission's MTS (maritime transport services) Guidelines.

To help ELAA members, shippers, forwarders and everyone else who needs to know, the ELAA has issued a matrix of Do's and Don'ts of EC competition law. The matrix assesses the legality of the industries' main operational practices before and after Oct. 18 -- thus comparing legality under the conference system and EC competition law.

I would like to make two points very clear. First, the changes affect only conferences on trades to and from Europe. Conferences outside the EU territory will remain legal. Second, after Oct. 18, shipping lines must carry out self-assessment to determine whether their operational practices comply with EU law. In this context, the significance of the MTS Guidelines, which are the outcome of intense consultation between the European Commission member states, shipper representative bodies and the ELAA, must not be underestimated. These guidelines take account of the shipping industry's specific nature and give straightforward direction on what can and cannot be done in the post-conference era.

Beyond Oct. 18, conference tariffs and conference-set surcharges such as CAF, BAF and THC will be forbidden. The same applies for conference business plans and the exchange of confidential information on market shares, volumes or prices between lines. Carriers will take independent decisions on pricing policy on rates, surcharges and ancillary charges including rebates, etc., which will have to be individually negotiated with customers without any contact with competitors. The cost structure of charges is thus up to each individual line. Lines will have to decide whether they charge a direct pass-on, a cost-plus or a discount approach. Increases in charges will be at the individual line's discretion; lines will have to be able to justify them.

ELAA members are taking these pricing matters seriously, forming internal working parties to investigate what their individual policy should be. On the one hand, they have to establish their own policy as there will be no more conferences; on the other, they must remain competitive. At the same time, they must be aware of operating within the law and not be accused of coordinated behavior with competitors.

Will shippers be happy with the new arrangement? I believe some will, as it gives them freedom to negotiate with each line individually, but some won't. Some customers enjoyed that there were certain "givens," such as the conference-set surcharges that allowed them to concentrate on the ocean rate.

The post-conference regime will provide new data- and information-related opportunities. The guidelines give guidance on the ELAA's activities as a trade association. The ELAA will be allowed to gather and compile information subject to strict safety mechanisms on aggregation and delays of release, which will safeguard that no confidential information is released unless it has become historic.

-- Data will be compiled and processed by a "black box" system operated by an independent data-analysis company.

-- Volume and price data will only be released when sufficiently aggregated.

-- To ensure carrier data is not released, the ELAA has implemented a carefully designed safety mechanism.

-- Demand and supply forecasts will be based on data compiled under the strict rules of the ELAA information exchange and publicly available information.

Data will be made available to non-member carriers and the general public free of charge or against fair remuneration. As such, the fruits of the ELAA information exchange will become available on broad scale and should benefit all industry stakeholders. Under these conditions, the post-Oct. 18 shipping milieu will result in a beneficial market environment for all concerned.