• Bulk shipping pools should be recognised as joint production/marketing arrangements meeting the need for vessels when and where required by charterers

• Bulk shipping pools do not per se infringe EU competition law.

Background

Strictly speaking, EU competition law has always applied to the bulk sector but, because of a long-standing sectoral exclusion for tramp shipping, the European Commission had no enforcement powers. However, that changed in 2006 when,as part of e a new regulatory regime , which also brought about the abolition of the liner conference system in EU trades, the Commission’s enforcement powers were extended to the bulk sector. In July 2008, the Commission published finalised guidelines on the new arrangements.

In adopting a position on competition, the bulk shipping marketplace should not take the view that it should be exempt, nor that it is in some way a victim. The position is that, in general, pools will typically meet the criteria of Article 101(3); these require that activities, which might otherwise appear to be in breach of the ban on collaborative activity in Article 101(1), are permissible in the event that (broadly) they work to the overall benefit of the consumer. Of course, the industry does not accept that pools are prima facie in breach of Article 101(1) either.

Bulk pools are not “price-fixing” mechanisms as is sometimes alleged, but rather joint production agreements together with marketing activities aimed at meeting a customer need.

The key points are therefore that:

• The global shipping marketplace is highly fragmented and competitive, and therefore is not open to influence.
• The largest pool (in tankers) has a market share of perhaps 10%.
• Vessel owners are not normally involved in detail in the day to day commercialisation of the vessels in the pool
• Pools provide a certainty of supply and capacity particularly in meeting contract of affreightment requirements.
• Far from excluding market entrants, pools make it possible for small owners to enter or stay in a market (for a specific vessel size) without having to fund a chartering operation.
• The shipping marketplace allows a great deal of substitution of vessels between trades and between vessel sizes, assuring a highly competitive and vibrant environment.
• The industry has been assured by the European Commission staff that to date they have received no complaint regarding the operation of dry or wet bulk pools: there is no clamour suggesting wrongdoing.

September 2011
TB7

For more information:
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