CCCS Recommends Three-Year Extension of the Block Exemption Order for Certain Liner Shipping Agreements

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1. The Competition and Consumer Commission of Singapore (“CCCS”) has recommended to the Minister for Trade and Industry (the “Minister”) that the Competition (Block Exemption for Liner Shipping Agreements) Order (the “BEO”) be extended for three years from 1 January 2022 to 31 December 2024, in respect of:

a. Vessel sharing agreements^[1] for liner shipping services^[2]; and

b. Price discussion agreements^[3] for feeder services^[4],

as these agreements generate net economic benefits^[5] for Singapore. The recommendation was made following CCCS’s consideration of all responses that were received during a three-week public consultation held from 14 July to 4 August 2021.

2. Further background on the BEO can be found in the Annex.

Feedback from Public Consultation

3. CCCS received ten responses from the public consultation. Respondents gave general feedback that the proposed recommendation to extend the BEO would have a positive impact on industry players and generate significant benefits for Singapore. More specifically, respondents supported the extension of the BEO in respect of vessel sharing agreements for liner shipping services and were largely neutral or supportive in respect of the extension of the BEO in respect of price discussion agreements for feeder services. However, the majority of 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. That said, CCCS also noted feedback from liners that the proposed three-year duration is reasonable and representative of the current business cycle. CCCS’s responses to the feedback received from the public consultation are set out in the Annex.

CCCS’s Recommendation to the Minister

4. In arriving at its recommendation, CCCS considered whether Liner Shipping Agreements^[6] will generate net economic benefits, taking into account responses from the public consultation.

5. CCCS assessed that:

a. Vessel sharing agreements for liner shipping services generate net economic benefit for Singapore. 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. Vessel sharing agreements also enhance competition among liners, by enabling smaller liners to provide services that compete with larger liners or with another alliance of liners.

b. Price discussion agreements for feeder services generate net economic benefit for Singapore. Price discussion agreements remain relevant to feeders operating in Singapore. 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. Also, surcharges imposed by feeders are still subject to negotiation with main lines, which are likely to possess bargaining power.

c. Price discussion agreements for main line services do not generate net economic benefit for Singapore. Main lines which provide liner shipping services across continents and regions have largely withdrawn from price discussion agreements. Insofar as Singapore-related routes are concerned, such agreements are no longer relevant to main lines. The main lines that responded to CCCS’s public consultation have indicated that they are not seeking an exemption for such agreements and that there would be no impact on them whether there is exemption for such agreements.

6. On the duration of the exemption, CCCS considers that, on balance, a duration of three years will provide sufficient legal certainty and lead time for investments, while also allowing CCCS to conduct more regular reviews to ensure that the BEO remains relevant and current to conditions within the industry.

-End-

^[1] Vessel sharing agreements are agreements between two or more liners on operational arrangements relating to the provision of liner shipping services, including the coordination or joint operation of vessel services, and the exchange or charter of vessel space, and which do not include any discussion or agreement on prices or remuneration terms to third parties.

^[2] Liner shipping services refer to the transport of goods by a vessel-operating carrier on a regular basis between ports in accordance with timetables and sailing dates advertised in advance.

^[3] Price discussion agreements are agreements between two or more liners which discuss commercial arrangements relating to the provision of liner shipping services, including prices and remuneration terms to third parties.

^[4] Feeder services refer to liner shipping services provided to main lines on regional trade routes between Singapore and ports that the main lines may not serve (e.g. main lines operate larger vessels that may not be able to call at smaller ports).

^[5] An agreement generates a “net economic benefit” if there are significant economic benefits that outweigh the anticompetitive effects, and the anticompetitive restrictions on competition are necessary to achieve the economic benefits and do not substantially eliminate competition.

^[6] Liner shipping agreements are agreements between two or more liners on technical, operational or commercial arrangements, or on price or remuneration terms.