Competition Review Report Additional Burden for Australian Shipping?

National shipping association Shipping Australia voiced its disappointment with the draft report released by the Competition Review Panel that has recommended removal of the existing shipping exemptions in Part X of the Competition and Consumer Act.

The Australian Federal Government appointed a panel of experts to undertake a major review of Australian competition laws and underlying competition policy. On 22 September 2014, the panel, headed by economist, Professor Ian Harper, released its draft report and recommendations.

The report said that the exemptions provided by Part X of the CCA were too broad and predicated on anti-competitive agreements in liner shipping.

The Panel recommended repeal of Part X of the CCA, adding that a block exemption should be granted by the Australian Competition and Consumer Commission (ACCC) for liner shipping agreements that meet a minimum standard of pro-competitive features.

“Repeal of Part X will mean that existing agreements are no longer exempt from the competition provisions of the CCA. Transitional arrangements are therefore warranted. A transitional period of two years should allow for authorisations to be sought and to identify agreements that qualify for the proposed block exemption,” the report reads.

With respect to coastal shipping the Panel said that having in mind the current Australian Government Review of Coastal Trading, the cabotage restrictions should be removed,” unless they can be shown to be in the public interest and
there is no other means by which public interest objectives can be achieved.”

“Not one of the users or providers of shipping services in Australia recommended this outcome,” the association said.

There are at least 25 international shipping companies providing services to Australia.

“Part X currently provides both the certainty of levels of service that shippers require and the certainty that carriers need to decide to invest in providing ships on Australian routes,” Shipping Australia CEO, Rod Nairn said.

“I expect that this number will reduce and competition will suffer under the proposed changes.

“The current system is promoting competition, as evidenced by the most competitive shipping rates ever seen. It seems ludicrous for the Panel to recommend so much extra bureaucracy and red tape in a philosophical quest to fix something that isn’t broken.”

According to the association, on the positive side, “at least the Panel has recognised that shipping requires special treatment and recommends the creation of a block exemption process.”

Shipping Australia believes that the proposed changes would, however, ” bring uncertainty by replacing clear legislation with an, as yet, undefined block exemption process to be developed in consultation with the shipping industry, but no doubt driven by the dogma of the ACCC. Anything falling outside these unknown limits will require the full authorisation process, which even the Panel agrees, “might lead to unnecessary compliance costs”.”

“This would clearly raise barriers to participation, reduce competition and increase shipping rates. Those shipping companies that can afford to remain in the Australian market may well be pleased,” Rod Nairn said.

“Shipping Australia will continue to provide constructive input to the Panel despite the fact that our previous submission seems to have been largely ignored.”

Full report is available here.