• Repeal of Part X could destabilize liner shipping, need for legal certainty
  • Harper recommends decision on block exemption be based on economics
  • Blanket exemption gives wrong signals of ACCC supporting cartels, chairman says

After Hong Kong, the liner shipping industry is in the spotlight in Australia since the government has approved a majority of the recommendations from the Harper Review, having decided that a general class exemption ought to be introduced into the Competition and Consumer Act 2010 (CCA), the Australian government said.

Repealing Part X of the Act would give the Australian Competition and Consumer Commission (ACCC) the authority over whether the shipping sector should be granted a block exemption order. The idea is to ensure that liner shipping arrangements remain competitive and efficient.

Responding to Harper’s recommendation in relation to the ACCC having the final say on granting a block exemption, the Australian government said it will work with the antitrust authority and relevant stakeholders, including shipping lines and importers and exporters, to investigate options regarding how a class exemption could be applied to the liner shipping industry. It would ensure that shipping routes to and from Australia continue to be reliably and competitively serviced and that the costs to obtain a class exemption are not burdensome, it stated in its 52-page response to the Competition Policy Review.

A Sydney-based lawyer said that any repeal of the exemption granted to the liner shipping industry could destabilize the sector and create a degree of legal uncertainty for the industry operations. This mirrors the opposition from Hong Kong’s liner shipping industry, which threatened an exodus unless it was granted immunity from the antitrust authority, as PaRR previously reported.

“All we are saying is that there should not be an automatic exemption and that parties should apply to the ACCC for a block exemption,” Ian Harper, the chair of the Harper Review Panel and a partner at Deloitte Touche Tohmatsu, based in Melbourne, told PaRR.

“We are not saying that conferences or shipping cartels should be struck down. We are saying that there should not be anything in the act, which automatically grants immunity,” Harper said in an exclusive interview with PaRR.

Instead the shipping sector should be able to approach the ACCC and seek a block exemption order, Harper said. Accordingly, the ACCCwould make its decision based upon the substantial lessening of competition argument, he added.

Harper does not anticipate an exodus in Australia, contrasted with the hype created in Hong Kong. For one, any options considered would need to be consistent with Australia’s international law obligations, the government stated. Second, the four-member Harper panel had recommended a two-year transitional period.

Further, any block exemption orders granted by the ACCC would need to meet a minimum standard of pro‐competitive features to be determined by the regulator in consultation with shippers, their representative bodies and the liner shipping industry. Harper does not envisage that the ACCC would suddenly take action against the parties to an agreement when the exemption is removed.

However, Harper told PaRR that once the blanket exemption is abolished, there is likely to be a quick line of applications for block exemptions. Whether or not an exemption would be granted, “it is a matter for the ACCC”, he added.

Though it is still early days, some lawyers told PaRR that, given the importance of liner shipping to Australia, any change could destabilisethe industry. One lawyer pointed to the red tape that already affects the maritime industry, and said that a repeal of Part X could put Australia at a disadvantage to trading nations across the Asia-Pacific. Any impact to international liner shipping conferences could give rise to market domination by leading players or alliances.

Rod Sims, former chairman of the ACCC, previously told PaRR that the antitrust regulator was keen to abolish the existing liner shipping exemptions, given that it sends the wrong message to the international community that the ACCC supports cartels. Australia has provided liner shipping services with immunity from its competition laws for almost 50 years.