TACA probe over price-setting

Date: 14/03/1996

SIXTEEN top shipowners are facing a renewed challenge to their agreement on rates and services for containerised cargo in the north Atlantic.

The Commission's Directorate-General for competition, DGIV, has sent a formal 'statement of objections' to the companies regarding one area of their Trans-Atlantic Conference Agreement (TACA).

This is the latest stage of a legal process which began in June last year, which could eventually lead to the imposition of fines on the firms for breaking the Union's anti-trust rules.

The Commission has never been comfortable with this liner 'conference' or its predecessor, the Trans-Atlantic Agreement (TAA), which accounts for 85&percent; of cargo traffic in manufactured goods in containers on north-Atlantic routes.

Shipping conferences have existed for more than 100 years. Some exporters do not like them, believing they can keep prices artificially high and allow for coordinated freezing of capacity.

On the other hand, they are often tolerated by competition authorities if they assure continuity of service between ports and pass on benefits to the customer, in this case shippers or consignees.

For this reason, the members of the TAA applied in August 1992 for a group exemption under Article 85 of the Treaty of Rome, which bans anti-competitive agreements.

In October 1994, the Commission outlawed the TAA but, having seen this coming, the conference members formed the TACA and filed again for immunity from fines in July 1994.

In the statement of objections sent to member companies - which include Nedlloyd Lijnen BV from the Netherlands, P&O Containers Ltd from the UK and AP Moller-Maersk Line from Denmark, as well as others from Korea, Singapore, Sweden, Switzerland, Mexico and the US - the Commission declared its opposition to one part of the conference.

This relates to a price agreement between the parties on the inland leg of a so-called 'multimodal' operation, concerning the ability of conference members to agree on the rate that will be charged in transporting cargo from one inland point to another.

For example, if a customer wants the entire journey between Chicago and Munich to be dealt with by conference members on different modes of transport, the firms have agreed rates applicable to the whole operation.

According to the Commission, the group exemption applies only to the sea transport leg of the journey and cannot relate to inland transport price-fixing. The companies have argued that their inland price-setting benefits the shippers and exporters using it, and should fall under the regulation.

A final decision on the legality of these agreements will come in a series of rulings from the European Court of Justice and the Court of First Instance, which are not expected until 1997 at the earliest.

In the meantime, the Commission's new statement of objections will be followed by replies from the lines involved. Immunity from fines cannot be removed without a formal decision by the college of Commissioners.