Shipping lines, customers at odds on industry reform

BUSINESSDESK: International shipping companies and their major customers are at odds on plans to end special competition arrangements for shipping lines.

The shipping companies are warning that New Zealand and the Pacific Islands may lose shipping services if an exemption to competition law is taken away from international shipping lines.

The New Zealand Shippers Council, which represents the biggest importers and exporters, says there is no evidence to suggest an exemption is needed. It is comfortable with shipping companies operating vessel sharing agreements where they share capacity but it wants the law to cover collusion on pricing in case it happens.

"Shipping lines are basically saying nothing is wrong, there is no problem, why change a thing," council chairman Greg Steed told BusinessDesk. "We are saying we need to have the legislation in place just in case."

Shipping lines are regulated by the Ministry of Transport under the Shipping Act and in the wake of a New Zealand Productivity Commission report it is proposed that they be treated like all other businesses under competition law in the Commerce Act.

Submissions from all sides of the debate have been put into the commission, to the Commerce (Cartels and other Matters) Amendment Bill being considered by parliament's Commerce select committee and to joint study by productivity commissions on strengthening trans-Tasman economic relations.

In a submission to the Commerce select committee, the International Container Lines Committee (ICLC), representing shipping lines servicing New Zealand, argues that shipping is a special industry and sector-specific regulation is appropriate and the norm overseas.

The group reminds New Zealand that it is a small trading nation at the very end of international trade routes and that the unintended consequences of regulation would be felt across the country and the Pacific.

Shipping lines are unlikely to be bothered to seek clearance for an international agreement simply because one small jurisdiction alone demands it.

"In the context of international co-operative contracts where New Zealand is only a tiny factor, ICLC submits that some carriers will simply withdraw from providing freight services to New Zealand."

Shipping should be treated differently under competition law because it is a hugely capital intensive industry with high fixed operating costs. It deals with changing peak and off-peak demands and has to provide regular schedules.

Commerce Minister Craig Foss has said freight services need to be as efficient as possible and strengthening mechanisms applying to international shipping was one way to achieve this.

The shipping lines argue they need to collaborate because New Zealand's rail and port infrastructure is in such a poor state, particularly in regional ports.

A transition to a Commerce Act-only regime for shipping lines was likely to increase volatility in shipping rates, they said.

Mr Steed says Europe has reformed competition rules for shipping and there has not been much change in shipping services.