Knowledge Highlights 21 November 2024
CCCS recommends renewing Block Exemption Order for liner shipping agreements for five years
From 27 May 2024 to 17 June 2024, the Competition and Consumer Commission of Singapore (“CCCS”) is seeking public feedback on its proposed recommendation to renew the Competition
(Block Exemption for Liner Shipping Agreements) Order (“BEO”) for five years from 1 January 2025 to 31 December 2029, in respect of the following liner shipping agreements (“LSAs”), which CCCS has assessed will generate net economic benefit (“NEB”) for Singapore:
- Vessel sharing agreements (“VSAs”) for liner shipping services: VSAs will improve the global connectivity of Singapore’s port and support Singapore’s status as a transhipment hub. VSAs also enhance competition among liners by lowering barriers to entry for smaller liners to provide services on trade routes and at frequencies that they would otherwise not be able to provide on their own due to lack of scale. Further, VSAs bring about environmental benefits by enabling liners to share, utilise, and deploy larger vessels that are more environmentally friendly.
- Price discussion agreements (“PDAs”) for feeder services: PDAs will remain relevant for some feeders’ businesses. Being able to participate in such PDAs attracts feeders to base their headquarters and operations in Singapore and connect their services through Singapore. Feeders, in turn, attract and anchor main lines to Singapore, thus expanding Singapore’s shipping network to support its transhipment hub. Anti-competitive effects from the use of such agreements appear to be limited. Firstly, surcharges imposed by feeders on main lines are still subject to commercial negotiation with main lines, which are likely to possess bargaining power. Secondly, main lines may be motivated to operate their own feeder services should the prices offered by (common) feeders be uncompetitive.
The BEO exempts certain types of LSAs from the prohibition against anti-competitive agreements under section 34 of the Competition Act 2004 (“Act”), under specified conditions and obligations. In assessing whether to recommend a block exemption order for LSAs, CCCS considered whether the LSAs will generate NEB. The BEO was first issued in July 2006, and extended in 2010, 2015, 2020, and 2021. The current BEO expires on 31 December 2024 and is currently the only block exemption order in force in Singapore.
According to CCCS, the recommended renewal period of five years will provide legal certainty to the industry and allow for longer term planning. The duration also supports the industry in meeting its obligations to achieve decarbonisation of the maritime sector.
About block exemption orders
Section 36 of the Act empowers the Minister for Trade and Industry 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.
Reference materials
The following materials are available on the CCCS website www.cccs.gov.sg:
