Van Miert set for clash with shipping lines

Date: 06/06/1996

By Bruce Barnard

KAREL Van Miert is heading for a showdown with the world's biggest container shipping lines in one of the most bitterly contested anti-trust battles in his three and a half years as Competition Commissioner.

The case has not generated much attention outside the maritime community, but its outcome could have a significant impact on the cost of shipping European exports to the US.

Van Miert upped the stakes last week by telling the 17 European, American and Asian member lines of the Trans Atlantic Conference Agreement (TACA) that their collective fixing of freight rates at sea and on land violated EU competition rules.

The ruling, which is being vigorously contested by TACA's Brussels-based lawyers, is the latest move in the Commission's ten-year bid to submit the shipping industry to the competition rules which apply to all other sectors.

Commission officials allege that TACA is simply a hybrid of an earlier accord, the Trans Atlantic Agreement (TAA), which they outlawed in late 1994. That decision is currently being challenged in the European Court of Justice.

In reply, Van Miert lifted the lines' immunity from fines and warned that the longer the case dragged on, the stiffer the penalties would be - up to a maximum of 10&percent; of their turnover.

The Commission has accepted collective rate fixing at sea and said it would allow similar 'collusion' on the land so long as the lines passed on some of the benefits to their customers.

But last week's ruling extending the ban on price-fixing from the land to the ocean suggests the Commission has given up hope of cutting a deal with the carriers.

Asked whether this was an escalation, Van Miert replied: “Yes, because the thing is dragging on far too long.”

The Commission and shipping lines have spent the past decade squabbling over a decision by EU governments in 1986 to grant conferences - groups of shipping lines that collectively set freight rates - a generous block exemption from the Union's competition rules.

This was in recognition of the fact that conferences provide regular service and need to get a return on their massive investments - a container vessel can cost up to 60 million ecu.

The Commission claims the exemption applies only to the ocean leg, for example from New York to Rotterdam, while the carriers maintain that it covers a door-to-door move, by ship and truck from, for example, Detroit to Düsseldorf.

But the Commission justified withdrawing TACA's exemption for the ocean leg on the grounds that it faced no competition:

the major independent, Taiwanese carrier Evergreen, also follows TACA's rate policy.

TACA, says the Commission, goes way beyond the definition of a conference. Van Miert alleges the lines simply want to create a supercartel.

The British and French shippers who filed the complaint with the Commission cheered Van Miert's latest move. Feelings against the lines ran so high that some companies, including ICI, the British chemicals group, and Distillers, the brewer of Guinness, considered establishing their own shipping operation.

Van Miert has also had to fight off blatant attempts by EU member states to 'nobble' his investigations - on several occasions TAA and TACA have been raised at meetings of EU industry and transport ministers as well as with MEPs.

TACA members have considerable political clout. Maersk,

the world's largest container operator, is owned by AP Moller, Denmark's biggest company. Other prominent European members include the UK's P&O, the Dutch Nedlloyd, Hamburg-based Hapag Lloyd and Atlantic Container Line of Gothenburg.

The case has sparked tension within the Commission as well, with DGVII (transport) urging a more sympathetic hearing for the lines.

TACA has eight weeks to respond to the Commission's statement of objections and can request an oral hearing.