Knowledge Highlights 23 July 2021
From 14 July 2021 to 4 August 2021, the Competition and Consumer Commission of Singapore (“CCCS”) is seeking public feedback on its proposed recommendation to the Minister for Trade and Industry (“Minister”), to 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 duration, which is comparable to other jurisdictions, ensures that the BEO continues to be relevant and current to the liner shipping industry. CCCS is seeking feedback on the possible impact of its proposed recommendations on the Singapore economy, in particular on players in the maritime industry such as main lines, feeders, port operators, logistics service providers, as well as exporters and importers.
By way of background, 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.
BEO extension: Vessel sharing agreements for liner shipping services
CCCS has assessed that vessel sharing agreements for liner shipping services will generate net economic benefit for Singapore. As stated in CCCS’ media release, vessel sharing agreements among liners:
- improve Singapore’s port connectivity and thus contribute to Singapore’s status as a major transhipment hub with consequent broader benefits to the economy; and
- enhance competition among liners, by enabling smaller liners to provide services that compete with larger liners or with another alliance of liners.
BEO extension: Price discussion agreements for feeder services
According to CCCS, feeders may discuss the recommended surcharges (e.g. fuel surcharge) charged to their main line customers to improve their position in commercial negotiations with main line customers. CCCS also assessed that feeders attract and anchor main lines to Singapore and thus expand Singapore’s shipping network to support its transhipment hub. Further, anti-competitive effects arising from the use of such price discussion agreements by feeders appear to be limited.
As main lines, which provide liner shipping services across continents and regions, have informed CCCS that they have largely withdrawn from price discussion agreements, no exemption will be extended to such agreements (marking a shift from the previous scope of application of the BEO).
About block exemption orders
Section 36 of the Act empowers the Minister to make a block exemption order, following CCCS’ 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.
The consultation documents can be downloaded from the CCCS website www.cccs.gov.sg under the section “Public Consultation”. Full details relating to the manner of response are included in the consultation document in the Appendix.