Knowledge Highlights 19 November 2021

Following the Competition and Consumer Commission of Singapore’s (“CCCS”) recommendation to the Minister for Trade and Industry (“Minister”), the Competition (Block Exemption for Liner Shipping Agreements) (Amendment) Order 2021 was gazetted on 15 November 2021 and will extend the Competition (Block Exemption for Liner Shipping Agreements) Order (“BEO”) for three years from 1 January 2022 to 31 December 2024, in respect of:

  • Vessel sharing agreements for liner shipping services, and
  • Price discussion agreements for feeder services,

which will generate net economic benefit for Singapore.

The BEO exempts certain types of liner shipping agreements (“LSAs”) from the prohibition against anti-competitive agreements under section 34 of the Competition Act (“Act”), under specified conditions and obligations. In assessing whether to recommend a block exemption order for LSAs, CCCS considered whether LSAs will generate net economic benefit. The BEO was first issued in July 2006, and extended in 2010, 2015 and 2020. In 2020, the BEO which would have expired on 31 December 2020 was extended until 31 December 2021 due to the highly uncertain times brought about by the Covid-19 pandemic.

From 14 July 2021 to 4 August 2021, CCCS sought public feedback on its proposed recommendation to the Minister to extend the BEO for three years. CCCS’s final recommendation to the Minister took into consideration responses received during the public consultation:

  • Feedback received indicated that the proposed extension of the BEO would have a positive impact on industry players and generate significant benefits for Singapore.
  • All respondents expressed support for CCCS’s proposed recommendation in relation to vessel sharing agreements for liner shipping services. The feedback is consistent with CCCS’s assessment that vessel sharing agreements for liner shipping services improve the production of liner shipping services in Singapore.
  • All respondents, except one, expressed support for or were neutral to CCCS’s proposed recommendation to extend the BEO in relation to price discussion agreements for feeder services. The feedback with respect to price discussion agreements for feeder services was generally consistent with CCCS’s assessment that such agreements improve the production of liner shipping services and the distribution of goods in Singapore. One respondent was concerned that price discussion agreements may provide feeders with the power to align and increase their charges in today’s market conditions. Responding to the concern raised by the respondent, CCCS notes that the potential for feeders to leverage on price discussion agreements to align and increase their charges to main line customers is limited even in today’s market conditions, as feeders still have to separately negotiate their services with main lines, which are likely to possess bargaining power.
  • In terms of the duration, most respondents preferred a longer extension of the BEO of five years, instead of the proposed three years, for greater legal certainty or lead time for investment into new vessels. On balance, CCCS maintains that the extension of the proposed BEO for three years provides sufficient legal certainty and time for industry players to make long term investments. The three-year duration for exemption also allows CCCS to conduct more regular reviews so that the BEO remains relevant and current.

About block exemption orders

Section 36 of the Act empowers the Minister to make a block exemption order, following CCCS’s recommendation, to exempt certain categories of agreements from the section 34 prohibition. A block exemption order is granted to agreements which contribute to improving production or distribution, or promoting technical or economic progress, without imposing undue restrictions, or possibly eliminating competition in respect of a substantial part of the goods or services in question.

The BEO is currently the only block exemption order in force.

Reference materials

The following materials are available on the CCCS website www.cccs.gov.sg and Ministry of Trade and Industry website www.mti.gov.sg:

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