MEL IN THE PRESS

Lloyds List
November 20, 2003

Conferences are not price-fixing cartels say EU's 'five wise men'

Panel of academics and economists, led by MEL-Erasmus, challenges popular perceptions, writes Janet Porter

THE European Commission's review of liner shipping has taken a dramatic twist with a panel of experts challenging the popular perception that conferences are rate-setting cartels.

Conferences function 'as a platform to discuss prices and related cost levels' but do not adhere to agreed freight rates, the report prepared by five leading academics and economists concludes.

But the hard-hitting study prepared for the European Commission ahead of next month's public hearing on maritime transport competition rules is also highly critical of the cases presented by supporters and opponents of the conference system.

'The submissions hardly provide any new evidence or proof that compounds the already well-known arguments in favour of or against the block exemption for liner conferences,' the report claims.

'It is clear that the ongoing evaluation of the 4056/86 regulation requires more work.'

After reviewing all the responses to a questionnaire sent out by Brussels earlier in the year, the analysis concludes that 'no convincing new arguments are made either for or against the existence of conferences' by any of the respondents.

The five consultants, led by Professor Hercules Haralambides of Rotterdam's Erasmus University, were asked by the EU's competition directorate to check the submissions from more than 30 interested parties.

However, Brussels stressed yesterday that the views in the 110-page report were those of the authors, and should not be regarded as representing the commission's position. 

The review of the current regulatory regime that exempts liner shipping from EU competition law could see shippers win their long campaign to have conferences abolished. 

However, in an annex to the main report, the five consultants argue that 'restrictions in competition, in the form of shipping conferences, are a low-cost way to ensure that the liner market is sustainable'.

In fact, there is no evidence that conferences raise freight rates, 'and may even lower them'. Rather than serving as a 'price fixing cartel', the conference system may create equilibrium, the detailed study claims. 

The most significant and elaborate responses to Brussels' questionnaire came from the European Liner Affairs Association and the European Shippers' Council which were the only two that attempted to offer quantitative proof in support of their arguments. 

Most of the rest, from other carrier groups, transport users, freight forwarders and national authorities, lacked any economic reasoning, according to the five experts. 

Even the submission from the European Shippers' Council contains little statistical data and no data analysis', the report says, with the council's argument on instability 'based on a lot of anecdotal evidence and press reports that fail to also consider that any freight instability could well be the result of too much competition rather than the lack of it'.

The report also challenges the ESC's argument that conferences are largely irrelevant as so much cargo is carried under service contract arrangements these days.

In that case, 'why try so hard to abolish them through regulatory reform rather than let them disappear due to market developments that will render them 'irrelevant' anyway?'

And in a remarkable endorsement of the controversial Trans-Atlantic Conference Agreement, the Brussels-commissioned report reckons that, in the period that followed deregulation of liner shipping in the US, 'Taca was instrumental in promoting freight rate stability'.

With both sides very split on the benefits of the century-old conference system, the consultants suggest a compromise between abolishing price-setting immunity while ensuring conditions are put in place to safeguard liner shipping alliances.