Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
1998-1999-2000
THE
PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
REVISED EXPLANATORY
MEMORANDUM
(Circulated by authority of the Minister for
Transport and Regional Services,
the Honourable John Anderson
MP)
TO THE BILL AS INTRODUCED
ISBN: 0642 452660
2
TRADE PRACTICES AMENDMENT (INTERNATIONAL LINER CARGO SHIPPING) BILL 2000
Part X of the Trade Practices Act 1974 (TPA) regulates the market conduct of international liner cargo shipping companies that collaborate as conferences to coordinate joint services, share capacity and agree on freight rates. Liner shipping comprises scheduled services for non-bulk cargo, most of which is carried in containers.
The following is a summary of the Bill to amend Part X:
• The Part X exemptions (from the competition rules in sections 45 and 47 of the TPA) will be limited to liner shipping activities covering ocean transport and loading and discharge operations at cargo terminals, including inland terminals used for assembling export cargo for delivery to a port, or delivering cargo to importers;
• the existing practice of allowing shipping conferences to negotiate collectively with stevedores will be confirmed;
• section 10.05 prohibiting discrimination between shippers will be repealed. The Productivity Commission recommended this on the grounds that the provision served no useful purpose, and could be harmful if it discourages efficient price discrimination;
• sections 10.17A and 10.18A are to be replaced by sections (with the same numbers) that clarify that liner shipping companies are not allowed to collectively agree on freight rates unless they have a registered conference agreement to which those freight rates apply. The Australian Government Solicitor has advised that there is some ambiguity about this in the current sections 10.17A and 10.18A;
- the current provisions stating that shipping conferences need not include freight rate details (or variations to those rates) in their registered conference agreements are being retained;
• a national interest test is to be included in assessing conduct by parties to an outwards liner shipping agreement that might unreasonably hinder Australian flag shipping;
• the Minister and Australian Competition and Consumer Commission (ACCC) will be empowered to accept court enforceable undertakings, given by shipping lines, aimed at ensuring a net public benefit;
• as far as practicable, the protection afforded to exporters under Part X will be extended to importers. This will include requirements that parties to an inwards conference agreement register their agreements and negotiate with the relevant designated body representing importers in respect of charges for land based services in Australia (eg Terminal Handling Charges - THCs), and for other matters in cases where the contract for shipping the cargo is made in Australia or where questions arising under the contract are to be determined in accordance with Australian law;
- a procedure for avoiding conflicts of jurisdiction with the country of export will be provided through a system of Ministerial Exemption Orders to deal with problems that may arise from overlapping jurisdictions. These exemption orders will be disallowable instruments by Parliament;
• the Minister for Transport and Regional Services (the Minister) and the ACCC will have increased powers to deal with conduct likely to result in an unreasonable increase in freight rates and/or an unreasonable decrease in services;
- the increased powers are to be used only in exceptional circumstances such as those where an agreement covers most carriers or capacity on a trade route;
- actions taken under the additional powers will be appealable to the
Australian Competition; and
• conferences will not be permitted to
unreasonably restrict entry of new parties;
In addition, section.10.01, which sets out the objects of Part X, is to be amended as a consequence of the amendments proposed in this Bill covering inwards liner cargo shipping services and Australian flag shipping.
FINANCIAL IMPACT STATEMENT
While the amendments will enhance the
operation of Part X, they will have no significant impact on Commonwealth
revenues or outgoings. There will be some relatively minor increases in the
costs of administering Part X because of the extension to inwards conference
agreements of most of the conditions applying to outwards conference agreements.
However there will also be some offsetting revenues (estimated at about $15,000
pa) from fees for registering inwards conference agreements.
BACKGROUND
Part X has its origins in the late 1920s and resulted from concerns that Australian exporters should have access to adequate and efficient liner shipping services at reasonable freight rates.
The legislation sets out conditions for granting limited, but assured exemptions from sections 45 and 47 of the TPA to allow liner shipping companies to collaborate as conferences. The conditions include requirements to negotiate with exporters on standards of service and freight rates to be provided under registered agreements. If exporters are dissatisfied with the negotiations, the Minister for Transport and Regional Services (the Minister) can refer the matter to the Australian Competition and Consumer Commission (ACCC) for investigation. This can lead to the Minister removing the exemptions.
Part X provides a legislative framework within which shipping conferences and their exporting customers can resolve problems through commercial negotiations, with only minimal government involvement.
Australia's major trading partners (USA, Japan, Korea, European Union and New Zealand) have arrangements broadly similar to Part X for regulating international liner shipping.
In addition to conference shipping, there has been a significant increase over the past decade in competing services offered by non-conference carriers. This follows an overall increase in global capacity which led to a steady decline in real freight rates to the point where liner shipping company profits have been, in general, well below normal levels for
industrial investments. However, liner shipping companies have succeeded
over recent times in restoring rates to more sustainable levels.
Part X is
administered by the Department of Transport and Regional Services, with
conference agreements being registered by the Registrar of Liner
Shipping.
Due to its relevance to competition policy, Part X was included in the Commonwealth Legislation Review Schedule for review in 1998/99.
On 12 March 1999 the Government, through the Assistant Treasurer – Senator the Hon Rod Kemp, referred Part X to the Productivity Commission (PC) for inquiry and report. The Terms of Reference for the PC’s inquiry were agreed with the Office of Regulation Review. The PC submitted its final report on 15 September 1999 in which it recommended retention of Part X with a number of amendments.
Australian exporters require access to adequate and efficient liner cargo shipping services with reasonable freight rates if they are to be internationally competitive. Such services are provided by groups of shipping lines collaborating as conferences and by independent lines operating in competition with conferences.
The problem to be addressed concerns establishing the most appropriate arrangements for controlling the anti-competitive features of liner shipping conference agreements. Shipping conferences operate under agreements between otherwise competing companies, and cover matters such as coordination of service schedules, sharing of cargo space on each others’ ships, ports to be covered, frequency of sailings, cargo capacity to be provided, and freight rates to be charged.
Both the liner shipping industry and exporters consider that the legal
certainty provided by the Part X exemptions from general competition law, is of
major importance to the continued provision of reliable shipping services of
adequate frequency and capacity for Australia’s international trade.
The Government needs to be involved in controlling the conduct of shipping
conferences because normal market forces are insufficient to ensure that
conferences do not exercise their market power to the detriment of the public
interest.
B. OBJECTIVES
The Government’s objective is to ensure that Australian shippers (ie.
exporters and importers) have ongoing, stable access to international liner
cargo shipping services of adequate capacity (including refrigerated capacity),
frequency and reliability, at freight rates which are internationally
competitive. The means by which this objective is achieved must reflect the
Government’s commitment to effective and efficient regulation.
C OPTIONS
The main options available to the Government are described below.
Option 1 Accept the recommendations of the PC (ie. retain Part X with several amendments).
The PC recommended the retention of Part X, but considered its operation could be improved with the following amendments:
• clarify that the exemption relating to rate setting extends to land based charges that normally form part of a 'terminal to terminal' shipping contract, and that the definition of terminal be widened to include terminals located away from ports, but within metropolitan areas of port cities;
• confirm the existing practice of allowing members of shipping conferences to negotiate collectively with stevedores;
• remove the exemption that presently allows conferences to collectively set door-to-door freight rates and replace it with a provision restricting collective rate setting to 'terminal to terminal' rates;
• repeal section 10.05 that prohibits price discrimination in certain circumstances, which the PC considers serves no useful purpose, and could be harmful if it discourages efficient price discrimination;
• add a 'national interest' test to sections 10.45(a)(v) and 10.53 that
deal with restrictions on actions that hinder an efficient Australian carrier;
and
• provide for more effective enforcement of undertakings given by
conference carriers.
Option 2 Accept the main recommendation of the PC to retain Part X, but
reject the amendments (ie. no policy change).
This option simply retains
the status-quo.
Option 3 Accept the PC’s recommendations to retain Part X, but announce several further changes to improve the application of National Competition Policy to international liner shipping.
Countervailing powers for importers
Option 3 also envisages
providing importers with similar countervailing powers to those provided to
exporters under Part X. This means extending the conditions in Part X applying
to outward liner shipping conferences, to inward conferences.
Increased powers for Minister and ACCC
This option is the same as
option 1 except that it involves granting the Minister for Transport and
Regional Services and the ACCC increased powers to deal with certain types of
agreement where there is a likelihood that, by a substantial reduction in
competition, such agreements will produce an unreasonable reduction in shipping
services or an unreasonable increase in liner shipping freight rates.
Guidelines as to when ‘Exceptional Circumstances’
arise
It is proposed that the Minister for Transport and Regional
Services in consultation with the Treasurer, issue guidelines on what
constitutes ‘exceptional circumstances’ for the
purpose of
exercising the increased powers mentioned above. These circumstances would
cover situations where an agreement covers a substantial majority of shipping
lines and capacity in a trade, and where the conduct of those shipping lines has
led to, or is likely to lead to, an unreasonable increase in freight rates
and/or an unreasonable reduction in services; with the result that the public
benefit from the operation of the agreement is outweighed by an anti-competitive
detriment.
Under section 29 of the TPA, Ministers with responsibility for various parts
of the TPA may be empowered to give directions to the ACCC in relation to the
Commission’s performance of its powers, or the exercise of its powers.
In 1995 and 1997 these powers were removed from the Treasury portfolio
Ministers in respect of Parts IIIA, IV, and the Communications portfolio
Ministers in respect of Parts XIB and XIC. Consistent with these amendments,
the power to direct should also be removed from the Transport portfolio
Ministers. This does not affect the Minister’s ability to refer matters
to the ACCC under Part X.
Open Conferences
The Joint Cabinet Submission recommends that
conferences be permitted to continue their practice of restricting new entrants.
However, where this is considered to be contrary to the interests of Australian
exporters and importers, the Minister and the ACCC would be empowered to
investigate and, if necessary, seek an undertaking from the conference to accept
the new entrant.
It is anomalous for the Australian Competition Tribunal to have investigative
powers under Part X, as occurs in sections 10.50 and 10.63. The 1993 Brazil
Review[1] recommended that these
powers be transferred to the ACCC, but the PC did not comment on the anomaly.
The primary role of the Tribunal is as a review body for the ACCC’s
adjudication decisions made under the TPA. It would therefore be appropriate
for the Tribunal’s investigative powers to be transferred to the
ACCC.
At present decisions taken under Part X are not reviewable by the Australian
Competition Tribunal as is the case with decisions taken under Part VII of the
TPA.
Bringing the review mechanism in Part X into line with other parts of
the TPA has merit. This is particularly important in the consideration of
increased powers for the Minister and the ACCC to make decisions. All decisions
taken by the Minister or the ACCC should be reviewable by the
Tribunal.
D. IMPACT ANALYSIS
Option 1 Accept the recommendations of the PC (ie. retain Part X with several amendments).
Benefits
While some submissions to the PC inquiry stated the view that there is no clear reason for liner shipping to operate under a regulatory regime different to other sectors of the Australian economy, in reality the compatibility of Australia’s regime for international liner shipping with those adopted by our major trading partners is of particular importance.
Liner shipping conferences have to conduct their business in accordance with the rules adopted by the many countries to which they provide services. It is clearly to the benefit of all parties to contracts for the carriage of goods by sea, to operate under similar competition rules. Part X, which provides conditional but assured exemptions, provides that benefit. Australia’s major trading partners including the USA, European Union, Japan, Korea and New Zealand provide exemptions for international liner shipping on a broadly similar basis.
The alternative procedures under Part VII of the TPA, that apply to other sectors of the Australian economy, differ from Part X in that exemptions can only be provided if the shipping lines concerned can demonstrate, to the satisfaction of the ACCC, that such exemptions are justified on public benefit grounds. Accordingly, the Part VII authorisation procedures would introduce a significant degree of uncertainty into the operations of liner shipping companies.
The PC found that Part X involves minimal – but adequate – regulation and promotes commercial relationships and commercial dispute resolution. It also found that repeal of Part X and its replacement by the general provisions of the TPA is unlikely to produce outcomes as good or better than Part X, or do so more efficiently.
Option 1 will not result in any significant increase in compliance burden
provided that shipping lines abide by the rules. Several of the amendments
recommended by the PC are directed to clarifying the extent of conference
exemptions from the TPA.
Adoption of the PC’s Recommendation 8.1A
and 8.2 would limit exemptions under
Part X to the maritime component of international trade carried by sea. The
PC found no justification for the Part X exemptions extending to inland haulage
services associated with the transport of cargo to or from the premises of
importers or exporters. The PC noted that although it did not believe that
serious economic harm would arise from the ability of conferences to quote
(collectively) door-to-door rates, the logic of competition policy requires that
the exemption be removed. The issue of compatibility with the conference
shipping regimes applied by our major trading partners does not apply to inland
haulage.
Adoption of the PC’s Recommendation 8.1B would confirm
the legitimacy of current practice by clarifying what may be some uncertainty in
the interpretation of sections 10.14 and 10.22 of Part X.
Adoption of the PC’s Recommendation 8.3 to repeal section 10.05, which prohibits price discrimination (as between different shippers) in certain circumstances will benefit some shippers. For example, carriers would be able to offer shippers (and potential shippers) of low value products lower freight rates than currently, once the link between freight rate differences and costs of servicing different categories of shippers is broken. This will increase economic efficiency and facilitate increased trade flows.
Adoption of the PC’s Recommendation 8.4 to add a national
interest test to the Australian flag shipping provisions would benefit
Australian shippers by ensuring that any action taken in the interests of
comparatively high cost Australian flag carriers will not result in increased
freight rates.
Adoption of the PC’s Recommendation 8.5 to
provide for more effective and flexible enforcement of undertakings given by
ocean carriers, will provide a powerful inducement for carriers to comply
strictly with any undertakings they may give as the basis for resolving a
problem raised by shippers. This amendment would also minimise the need for the
Minister to use the more draconian enforcement powers available in the form of
deregistration of conference agreements.
Costs
These amendments will not result in any significant increase in the cost of
administering Part X nor to the costs of compliance by liner shipping operators.
However, removal of restrictions on price discrimination (Rec. 8.3) may
adversely affect some shippers, depending on the pricing policies adopted by
shipping companies. For example, shippers of small numbers of containers might
have to pay relatively higher freight rates compared to shippers of large
numbers of containers than currently. But this is a commercial issue that does
not warrant government regulation.
Option 2 Accept the main recommendation of the PC to retain Part X, but reject the amendments (ie. no policy change).
In the short term, leaving Part X in its present form would not result in any
additional benefits or costs to Australia’s shippers (exporters and
importers) or liner shipping operators.
However, in the longer term the
issues mentioned under options 1 and 3 could lead to Australian shippers being
disadvantaged through not making the amendments to Part X referred to in those
options.
Option 3 Accept the PC’s recommendations to retain Part X, but announce several further changes to improve the application of National Competition Policy to international liner shipping.
The PC report concentrated mostly on the case for and against retaining Part X rather than on improving the application of competition policy to Part X in the case that it was retained. Hence, this option was not explicitly considered in the PC’s report.
Countervailing Powers for Importers
The case for retaining Part X is premised on the basis that it is in the interest of Australian shippers (currently only exporting shippers), and therefore the public interest, to grant them countervailing powers to negotiate with conferences. However, this argument applies equally to importers as it does to exporters, and therefore as far as practicable, inward conferences should be subject to the same provisions as outward conferences.
The PC noted that the Attorney-General’s Department advised the 1993 Brazil Review that, given the direct effect of inward liner shipping on Australia there was, in principle, no reason why Australia could not assert jurisdiction over such shipping in a manner consistent with international legal principles. In relation to the actual enforcement of such jurisdiction, it is recognised that certain practical constraints would exist and that the question of possible conflict with foreign jurisdictions, with equally valid jurisdiction claims, could arise. In this respect it pointed out the need for a conflict avoidance mechanism. Such a mechanism could be based on principles developed by the OECD's Maritime Transport Committee.
The OECD principles concerning the regulation of international liner shipping include ones aimed at avoiding problems from overlapping jurisdictions. Provided these principles are followed, unnecessary conflicts of jurisdiction, and additional costs to industry, will be avoided.
Basically, the OECD principles call for bilateral or multilateral consultations between the countries concerned when changes made, or contemplated, by a country to competition laws affecting shipping may affect the interests of another country. In implementing these principles, full use should be made of existing OECD fora including the Maritime Transport Committee.
The USA and European Union have exercised jurisdiction over inward and outward conferences for some time without creating difficulties from overlapping jurisdictions.
The PC’s report notes on page 153 that the Importers Association of Australia argued that it was desirable to require inward conferences to negotiate with importers on land based charges as well as ocean based components of conference charges.
Under some arrangements covering the carriage of goods by sea, shipping lines
and importers may agree that a service contract covering imports is to be made
in Australia, or made subject to Australian law. Under such a contract,
importers are generally responsible for paying the freight charges covering the
ocean carriage as well as the charges at the port of unloading.
The current
practice of providing inward liner shipping companies with a blanket exemption
to collaborate as conferences, without any of the obligations imposed on outward
shipping conferences, places importers at a significant disadvantage. This
situation is not considered to be in the public interest and, as far as
practicable, the arrangements applying to outward conferences should also apply
to inward conferences.
Benefits
The proposed change would extend the general Part X safeguards to importers in the interests of reducing the costs of Australia’s imports. This will ensure that Australian importers have countervailing powers require negotiations with conferences on relevant freight rate charges and levels of service. It will give our importers rights to require negotiations with conferences on freight rates, surcharges, and other conditions of carriage, and to receive information about carrier costs on a similar basis to our exporters.
The Part X exemptions that carriers receive will then be on a basis of similar conditions for outwards as for inwards liner cargo shipping services.
The increased coverage of Part X would be especially valuable if the current oversupply of containership capacity were to be absorbed by increasing world trade, and upward pressures on relevant freight rate charges were to become apparent.
The benefits to importers from having countervailing powers to prevent or reduce increases in freight rates on imports arising from contracts of carriage entered into in Australia far outweigh the relatively small costs associated with this increase in regulation.
However, freight rates are not the only criterion on which to judge benefits.
The levels of service are also of major importance to shippers (exporters and
importers) and this factor needs to be taken into account when negotiating
freight rates.
Given the competitive forces in the domestic economy, the
potential savings and benefits are likely to flow through to consumers in
Australia, including those that use imported goods as inputs to the production
of Australian exports.
Costs
Liner Shipping Services Ltd (the Secretariat for the conference lines) informed the PC that the membership of outward and inward conferences are either similar, or exactly the same. The PC report (page 155) noted that some participants considered that the administrative costs and registration fees for inwards conferences would be small.
The cost to industry of registering inward liner shipping conference agreements would be about $35,000 in the first year. After this the costs are likely to be in the order of about $15,000 pa to cover the registration of new agreements and variations to existing agreements.
From the Government’s side there would only be a marginal increase in
workload and administrative costs. It has been estimated that about an
additional one half of a staff year would be required to handle the registration
and other processes associated with applying Part X to inward liner shipping
conferences.
While there would be some increased costs for carriers, Part X
is fundamentally a low cost, light-handed regime. These increased costs may be
passed forward to Australian shippers, but the benefits of lower freight rates
and surcharges are likely to vastly outweigh these costs.
The reason for the proposed increased powers is to guard against the possibility that future cooperative agreements between shipping lines may result in significant reductions in previous levels of non-conference competition and that this may lead to conduct that is not in the public interest.
The PC flagged the possibility that the current situation of strong competition in the liner shipping industry may change and that an appropriate regulatory regime will need to be able to adapt to future developments in international liner shipping markets (Overview page XXX). The PC also noted on page XXVIII that “...evidence available to the Commission consistently suggests that conferences are subject to effective competition from independent (ie. non-conference) operators”.
There is a possibility that discussion agreements, (ie. those that cover conference and non-conference carriers as well as different conferences in particular trades) will become more widespread than at present and result in freight rates being increased to unreasonable levels, or capacity offered curtailed to create a shortage of shipping space and hence put upward pressure on freight rates.
The 1993 Brazil Review of Part X contains, at Appendix D, advice from Legal Counsel Mr CP Comans, that states among other things, that the current Ministerial enforcement powers under section10.45(a)(iv) of Part X could give rise to some uncertainty about the Minister’s powers. Section 10.45(a)(iv) provides the main grounds on which the Minister may de-register a conference agreement. Those grounds are:
• “that parties to an agreement have given effect to or applied, or propose to give effect to or apply, the agreement without due regard to the need for outwards liner cargo shipping services provided under the agreement to be :
− efficient and economical; and
− provided at the capacity and frequency reasonably required to meet the needs of shippers who use, and shippers who may reasonably be expected to use, the services.”
Mr Comans noted that there could be considerable debate concerning the interpretation of the words “without due regard” and “efficient and economical” used in s.10.45(a)(iv).
In light of Mr Comans’ opinion and submissions, the Brazil review
recommended additional regulation in Part X to deal with accords and discussion
agreements, because of their potential to reduce the normal levels of
competition that exist between conference and non-conference carriers.
Under
the proposed increased powers the ACCC will be empowered to undertake an
investigation on its own initiative into such agreements and make
recommendations to the Minister. The Minister will have the power to suspend the
operation of such agreements if, after consultations with affected parties (ie
conference lines and shippers), the conference lines do not give a
court-enforceable undertaking that would make suspension unnecessary.
The Government recognises that shipping lines need to have confidence that the Part X exemptions will stand so long as they conduct their business in accordance with the objects of Part X, and do not engage in conduct that is, or is likely to be, against the public benefit.
With this in mind guidelines have been developed covering the exercise of the increased powers granted to the Minister and ACCC. These are referred to in the Second Reading Speech and under item 102 of the Notes on Clauses in this Explanatory Memorandum.
The relevant industry parties were consulted in the preparation of the guidelines.
Decisions made under the increased powers will be reviewable by the Australian Competition Tribunal in line with arrangements applying to authorisations and notifications under Part VII of the TPA.
If shipping conferences conduct their business in accordance with the objects
and rules in Part X (which they are most likely to do), there would be no need
to invoke these increased powers, and hence it is likely that there would not be
any significant additional cost attached to this option, nor would there be
increased uncertainty for business.
This option essentially provides a form
of reserve power to deal with situations where conferences might act in a manner
contrary to the national interest. The very existence of such a reserve power
is likely to induce conferences to behave in accordance with the objects to Part
X. Most issues between shippers and carriers would continue to be resolved
commercially.
Benefits
The increased powers proposed under this option improve the application of national competition policy to Part X and make it more consistent with the general provisions of the TPA. It also introduces the concepts of ‘substantial lessening of competition’ and ‘the public benefit’ into Part X. These concepts also provide a guide to those circumstances in which the general exemptions granted under Part X should be reconsidered.
Under these arrangements, the Minister for Transport and Regional Services
and the ACCC will be empowered in exceptional circumstances to examine
agreements, such as discussion agreements, where it is considered the agreement
may result in a substantial lessening of competition likely not to result in a
public benefit. In these circumstances, the ACCC would conduct a public inquiry
to determine whether the public benefit arising from the collusive behaviour
outweighs the competitive detriment. This public benefit test is consistent
with the objectives in Part X as well as the broad thrust of competition policy.
The benefits flowing from the increased powers are difficult to assess, but
if the availability and/or exercise of the increased powers resulted in keeping
freight rates only 1% below what they would otherwise be, this could result in
savings of about $10 million per year. This figure is calculated on the basis
of the current number of export containers (around 1 million) at an average
freight rate of $1,000 per container.
Costs
The PC found (Finding 8.3) that it was unable to identify clear benefits to offset the costs (including problems of definition) that would be created by denying discussion agreements the exemptions currently provided under Part X. It concluded that current safeguards exist to protect shippers against exploitative practices under discussion agreements.
The Government has decided that, notwithstanding the views of the PC, some stronger powers need to be available to deal with exceptional circumstances that may arise.
The costs of the ACCC undertaking an inquiry would be similar to the costs associated with an application for authorisation under Part VII of the TPA. The cost includes a fee of $7,500 charged by the ACCC and payable by the applicant for authorisation. The PC noted on page 130 that this is well below the costs to the ACCC and that the total resource cost to the ACCC of the authorisation process averages about $45,000 per case.
In addition, the parties to the conference agreement under investigation
would incur costs in preparing and submitting its case to the ACCC. These could
be of a similar order to those of the ACCC.
Against these costs, it is
important to consider the potential benefits to users of shipping services (see
comments under Benefits above).
The PC’s report (pages 160 to 161 and Appendix B pages 7 and 8) notes
arguments for and against closed conferences and that there has been
considerable debate on this matter.
The problem with the current provisions
under Part X is that while cooperation and rationalisation by means of closed
conferences may provide desirable outcomes for shippers, it is also possible
that under certain circumstance closed conferences may be able to exploit
shippers by charging monopolistic prices (see PC report page 160).
Benefits
The proposed change would provide a degree of “openness” to conferences that are now able to be closed to new members, while avoiding the risk of over-capacity and rising costs that the PC concluded was associated with open conferences. Also, given the possibility that closed conferences may result in conduct that is not to the public benefit, a hybrid option would provide a better outcome than strictly adopting one system or the other.
While shipping lines would be able to continue with the closed conference
arrangement, they would not be permitted to refuse admission to an independent
line that wanted to join a conference and was prepared to abide by the rules of
the conference agreement.
Informal discussions with representatives of
conference lines indicates that, in practice, conferences would have no problems
with admitting new entrants provided they were prepared to abide by the
conference rules. In fact it would be in the interest of the conference
concerned to accept a new entrant under such conditions, as it would ensure that
the aspirations of the new entrant could be negotiated, and accommodated in a
manner that was consistent with providing appropriated levels of capacity in
a trade and well coordinated high levels of service.
As opposed to the free
for all of open conferences, the arrangement agreed by the Government would
avoid situations where any shipping line could join a conference with whatever
capacity they wished, leave the conference at any time without reasonable notice
and generally disrupt the operation of a conference.
Costs
Provided shipping conferences observed the rules in respect of the proposed new conditions for admitting new entrants to conferences, there would be no additional compliance costs.
On the other hand if a conference unreasonably refused admittance to a new applicant for conference membership, this could result in an ACCC inquiry and action by the Minister to require the conference in question to admit the new applicant. The consequences of such actions could be:
− the ACCC having to undertake an inquiry at some cost. While this
could be significant, it should be considerably less than the $45,000 for an
authorisation inquiry; and
− the conference in question having to
expend a similar amount in responding to the ACCC’s inquiry.
The PC encourages maximum public participation in its inquiries. In this case, a call for submissions was advertised and an issues paper was released in late March 1999 to assist interested parties in preparing submission. The PC held informal discussions with several organisations and individuals and also conducted public hearings in both Sydney and Melbourne after the release of its interim position paper.
Shipper and carrier interests, business, farming, and legal lobby groups, academics, and Commonwealth and State Government departments and agencies were among the parties that made a total of around forty submissions to the PC. A full list of participants in the consultation process and a summary of their views are available in Appendix A of the PC’s report.
The retention of Part X was supported by the Australian Peak Shippers Association, the Australian Chamber of Commerce and Industry, the Australian Dairy Industry Council, the Australia Wool Industries Secretariat, Interlaine (representing importers of wool in the European Union), the State Governments of South Australia, Tasmania and Queensland, the Department of Infrastructure in Victoria, and the Sea Freight Council of Western Australia (includes State Government representatives).
There were several associations representing parties not directly involved in
exporting goods which considered Part X should be repealed, and international
liner shipping made subject to the same competition policy regime as Australian
industry generally.
These included the Business Council of Australia (BCA),
the Law Council of Australia, the Australian Consumers Association, and the
National Farmers Federation (NFF).
However, the NFF recommended the progressive withdrawal of the exemptions
provided by Part X, starting with a particular trade so that the results could
be tested before proceeding further.
Liner Shipping Services Ltd
(representing conference shipping) informed the Department of Transport and
Regional Services on 30 September 1999 that it would be surprised if the views
expressed by the BCA in its submission to the PC had the support of all the BCA
members. P&O Nedlloyd and BHP are members of the BCA and both put in
submissions to the PC which were supportive of the arrangements in Part
X.
The Government decided to adopt Option 3. This option accepts the PC’s
threshold recommendation to retain Part X with some relatively minor amendments,
but also adds a number of other changes to improve the application of
competition policy to international liner shipping. A media announcement to
this effect was made on 23 December 1999.
Under Option 3, Part X would be
retained but the Minister for Transport and Regional Services and the ACCC,
would be granted increased powers to identify and address concerns about
anti-competitive behaviour. As noted above, some collusive activities in
international shipping have more potential than others to result in an
unreasonable reduction in competitive forces in some market segments,
particularly discussion agreements and accords which cover both conference and
non-conference carriers.
The Passage of the Trade Practices Amendment (International Liner cargo
Shipping) Bill 2000 would implement the Government’s decision referred to
above.
As international liner cargo shipping is a dynamic industry, the PC
recommended that Part X should be reviewed again in 2005, in order to ascertain
whether technological or institutional changes have substantially altered the
conclusions of its report. The Government has agreed to this approach.
TRADE PRACTICES AMENDMENT (INTERNATIONAL LINER CARGO SHIPPING) BILL 2000
Clause 1 Short Title
Clause 1 provides that the Bill may be cited
as the Trade Practices Amendment (International Liner Cargo Shipping) Act
2000.
Clause 2 Commencement
Clause 2 specifies that the Act will commence
on the 28th day after Royal Assent, except that Part 2, and Division 2 of Part
3, of Schedule 1 will commence four months (or a longer period up to 6 months if
specified in regulations) after Royal Assent. The reason for this is to allow a
reasonable transitional period for the relevant parties to make the necessary
arrangements to comply with the new provisions concerning inwards liner shipping
conferences.
Clause 3 Schedule(s)
Clause 3 provides for the amendment of the
Trade Practices Act 1974 as specified under the applicable items in the
relevant Schedule.
Schedule 1 – Amendment of the Trade Practices
Act 1974
Item 1 Paragraph 29(1A)(a) – (Ministerial directions to
Commission)
This item adds Part X to the list of parts of the Trade
Practices Act (TPA) to which the relevant Minister must not give directions to
the Australian Competition and Consumer Commission. This brings Part X into
line with other parts of the TPA.
Item 2 Subsection 40(3) – (Inquiries by Tribunal)
This
subsection is being repealed as it only has application in respect of inquiries
by the Tribunal under Part X. As the Tribunal’s inquiry role under Part X
is to be transferred to the ACCC, subsection 40(3) is no longer
necessary.
Item 3 Paragraph 10.01(1)(a) – (Objects of Part
X)
This is just an editorial amendment that makes it clear that all
the paragraphs (a), (b), (c) and (d) apply in interpreting the principal objects
of Part X. (See item 4 for new paragraph (d)).
Item 4 Subsection 10.01(1) – (Objects of Part
X)
This item adds a new paragraph (d) to cover the objects of Part X in
respect of protecting the interests of importers (paragraph (a) already covers
exporters). The reason for having the qualification of ‘as far as
practicable’ is that inwards liner shipping services provided for
Australian importers may also be subject to competition rules in the country of
export, and it is important to try and avoid conflicts that may arise from
overlapping jurisdictions.
Our major trading partners including the USA,
European Union, and Japan, have conditional exemptions from competition rules
broadly similar to Part X, and it is a generally accepted practice of
international comity that the country of export has the major interest in
respect of exemptions from competition rules. These considerations have been
taken into account in drafting the amendments in the Bill covering the controls
on inwards liner shipping conferences.
Item 5 Paragraph 10.01(2)(a) – (Objects of Part
X)
This item changes the reference to ‘outwards liner cargo
shipping services’ to ‘international liner cargo shipping
services’ so that the subsection applies to both inwards and outwards
liner shipping services (see existing definition of ‘international liner
cargo shipping service’).
Item 6 After section 10.01 – (Objects of Part
X)
This item inserts a simplified outline of Part X under a new section
10.01A to help give a broad understanding of the principal features of Part
X.
Item 7 Subsection 10.02(1) - (Interpretation of Part X)
This item
provides a definition of ancillary cargo service to cover the
ancillary services that can form part of a terminal to terminal service provided
by, or on behalf of, a liner shipping company. For the purposes of Part X,
ancillary cargo services can consist of an inter-terminal
transport service, a stevedoring service, an on-wharf service, or any other
service that is also a part of a terminal-to-terminal service and is provided
by, or on behalf of, a liner shipping company.
Item 8 Subsection 10.02(1) – (Interpretation of Part X)
Item
8 adds the definition of Australian importer as a person
who imports goods into Australia. This complements the existing definition of
‘Australian exporter’.
Item 9 Subsection 10.02(1) – (Interpretation of Part X)
This
item amends a reference to liner cargo shipping services to include both
outwards and inwards liner cargo shipping services.
Item 10 Subsection 10.02(1) – (Interpretation of Part X)
In
item 10 the definition of conference agreement has been extended
to include both outwards (as at present) and inwards conference
agreements.
Items 11 and 12 Subsection 10.02(1) – (Interpretation of Part
X)
Item 11 defines designated inwards peak shipper body as
an association declared to be so by the Minister under a new subsection
10.03(2A). Item 12 similarly defines designated inwards secondary shipper
body, but as an association described in the new subsection 10.03(2B)
(see item 52). A shipper body is an organisation that represents the users
of liner shipping services (generally exporters and importers or parties acting
on their behalf in arranging the carriage of cargo by ships).
Item 13 Subsection 10.02(1) – (Interpretation of Part X)
This
item defines a designated inwards shipper body as either a
designated inwards peak or secondary shipper body (see items 11 and 12).
Items 14 and 15 Subsection 10.02(1) – (Interpretation of Part
X)
Item 14 defines designated outwards peak shipper body as
an association specified in subsection 10.03(1). Item 15 defines
designated outwards secondary shipper body as an association
described in subsection 10.03(2).
Item 16 Subsection 10.02(1) – (Interpretation of Part X)
This
item defines designated outwards shipper body to mean either a
designated outwards peak shipper body or a designated outwards secondary shipper
body (see items 14 and 15).
Item 17 Subsection 10.02(1) – (Definition of designated peak shipper
body)
The existing definition of ‘designated peak shipper
body’ is repealed under this item, as it has been included in new
definitions under items 11 and 14.
Item 18 Subsection 10.02(1) – (Interpretation of Part X)
Item
18 defines a designated port area (a term used in subsequent
amendments) as an area within the limits of a port appointed under section 15 of
the Customs Act 1901.
Items 19 and 20 Subsection 10.02(1) – (Interpretation of Part
X)
Item 19 extends the definition of designated secondary shipper
body to mean either a designated outwards (as at present) or designated
inwards secondary shipper body. Similarly item 20 extends the definition
of designated shipper body to include both designated outwards and
inwards designated shipper bodies.
Item 21 Subsection 10.02(1) – (Interpretation of Part X)
This
item defines an exemption order as an order under section 10.72A
(see item 141 which covers exemption orders in respect of inwards liner shipping
conferences).
Item 21A Subsection 10.02(1) – (Interpretation of Part
X)
This item adds a new definition to cover the use of the term
freight rate agreement. The term, which is used in the new
sections 10.17A and 10.18A referred to in items 71A and 72A, means a conference
agreement that consists of or includes freight rate charges.
Item 22 Subsection 10.02(1) – (Interpretation of Part X)
This
item extends the definition of freight rate charges to cover both
outwards (as at present) as well as an inwards liner cargo shipping
service.
Item 23 Subsection 10.02(1) - (Interpretation of Part X
This item
defines handling cargo as including a service that is related to
handling of cargo.
Item 24 Subsection 10.02(1) – (Interpretation of Part X)
Item
24 defines inland terminal as having the meaning given in section
10.02A (see item 49).
Item 25 Subsection 10.02(1) (Interpretation of Part X)
This item
defines international liner cargo shipping service to mean an
outwards or an inwards liner cargo shipping service.
Item 26 Subsection 10.02(1) – (Interpretation of Part X)
This
item introduces a new definition to cover inter- terminal transport
service, which is a term used in subsequent amendments.
Items 27, 28, and 29 Subsection 10.02(1) – (Interpretation of Part
X)
These items define inwards conference
agreement, inwards liner cargo shipping service, and
inwards loyalty agreement.
Item 30 Subsection 10.02(1) – (Interpretation of Part X)
This
item defines inwards scheduled cargo shipping service as meaning a
scheduled cargo shipping service (defined under item 41) where the transport of
cargo by sea commences from a place outside Australia and ends at a place in
Australia.
Item 31 Subsection 10.02(1) – (Interpretation of Part X)
This
item defines inwards varying conference agreement to
mean an agreement that varies an inwards conference agreement.
Item 32 Subsection 10.02(1) – (Interpretation of Part X)
This
item repeals the existing definition of liner cargo shipping service,
as it is replaced by new definitions of inwards and outwards liner cargo
shipping services (see items 28 and 35).
Item 33 Subsection 10.02(1) – (Interpretation of Part X)
Item
33 extends the definition of loyalty agreement to cover both
outwards (as at present) as well as inwards conference agreements.
Items 34, 35, 36 and 37 Subsection 10.02(1) – (Interpretation of
Part X)
These items define outwards conference
agreement, outwards liner cargo shipping service, outwards loyalty
agreement and outwards scheduled cargo shipping service in
relation to outwards liner cargo shipping services.
Item 38 Subsection 10.02(1) – (Interpretation of Part X)
This
item defines outwards varying conference agreement to mean an
agreement that varies an outwards conference agreement.
Item 39 Subsection 10.02(1) – (Interpretation of Part X)
This
item defines port terminal as being the area within a wharf
appointed under section 15 of the Customs Act 1901.
Item 40 Subsection 10.02(1) – (Definition of pricing
practice)
This item replaces ‘liner cargo shipping services’
with ‘outwards liner cargo shipping services’ in the definition of
‘pricing practice’.
Item 41 Subsection 10.02(1) – (Interpretation of Part X)
This
item defines scheduled cargo shipping service as meaning a
scheduled service for the transport of cargo by sea, generally by containers and
at predetermined freight rates.
Item 42 Subsection 10.02(1) – (Interpretation of Part X)
Item
42 inserts a definition of stevedoring service to include the
loading or unloading of cargo into or from a ship, or the handling of cargo
within a port terminal.
Item 43 Subsection 10.02(1) – (Interpretation of Part X)
This
item defines terminal-to-terminal service as meaning an outwards
or an inwards scheduled cargo shipping service, together with any ancillary
service that relates to the outwards or inwards scheduled cargo shipping
service. It has the effect of defining a terminal-to-terminal service
as meaning a service that includes sea transport, handling
of cargo at a port terminal and an inland terminal, and inter-terminal transport
services. The definitions of ancillary service, handling cargo,
inter-terminal transport service and stevedoring service
are relevant to interpreting a terminal-to-terminal
service.
Item 44 Subsection 10.02(1) – (Interpretation of Part X)
This
item extends the definition of varying conference agreement
to cover both an outwards (as at present) as well as an inwards conference
agreement.
Item 45 Subsection 10.02(2) – (Interpretation of Part X)
This
item confines the interpretation in Subsection 10.02(2) concerning the
interpretation of minimum levels of service (MLS), to outwards liner cargo
shipping services. Item 46 provides an interpretation of MLS in respect
of inwards liner cargo shipping services.
Item 46 After subsection 10.02(2) – (Interpretation of Part
X)
This item introduces a new subsection 10.02(2A) that provides an
interpretation of minimum levels of service in respect of ‘inwards liner
cargo shipping services’, that is similar to the definition in subsection
10.02(2).
Item 47 Subsection 10.02(3) – (Interpretation of Part X)
This
item clarifies that subsection 10.02(3) concerning agreements that vary existing
agreements, applies only to outwards conference agreements (see item 48 for
inward agreements).
Item 48 At the end of Section 10.02 – (Interpretation of Part
X)
This item introduces a new subsection 10.02(4) that provides a similar
definition to the existing subsection 10.02(3) concerning varying conference
agreements, but applies it to inwards conference agreements. This item also
introduces a new subsection 10.02(5), which provides that where an ancillary
service (eg. stevedoring) is provided on behalf of a shipping company, that
service is taken to be provided by the shipping company for the purposes of Part
X.
Item 49 After section 10.02 – (Interpretation of Part X)
This item introduces a new section 10.02A that gives the Minister the power to declare that a specified facility is an inland terminal for the purpose of Part X. The amendment provides criteria for making such declarations, which will be disallowable instruments. The criteria includes a requirement that the facility be used by ocean carriers for assembling export cargoes for transport to a port or delivering imported cargoes to importers or their representatives.
This amendment is needed because the exemptions granted under the Bill for
liner shipping companies to collaborate as conferences are limited to
‘terminal to terminal’ type shipping arrangements, but with the term
‘terminal’ to include a port terminal as well as an inland terminal.
The Attorney-General’s Department has advised that, as drafted, the
new section 10.02A will ensure that any declarations made by the Minister would
not breach section 99 of the Constitution by giving preference to one State over
another State.
Items 50 and 51 Subsections 10.03(1) and (2)– (Designated outwards
shipper bodies)
These items confine the interpretation of subsections
10.03(1) and (2) to outwards liner cargo shipping services. An interpretation
in respect of inwards liner cargo shipping services is given under item
52.
Item 52 After subsection 10.03(2)
This item introduces new subsections 10.03(2A) and (2B) that allow the
Minister to declare that certain bodies may be designated as representing the
interests of users of inwards liner cargo shipping services (similar to
provisions relating to users of ‘outwards liner cargo shipping
services’).
Such associations are known as a ‘peak shipper
body’ or ‘secondary shipper bodies’ and are given legislated
rights under Part X to negotiate with shipping conferences on matters such as
freight rates and levels of services provided under registered conference
agreements. The existing subsections 10.03(1) and (2), as amended under items
50 and 51, cover the provisions in relation to outwards liner cargo shipping
services.
Items 53 and 54 Section 10.03(3) and (4) – (Designated inwards
shipper bodies)
These items extend the existing provision for registering
designated shipper bodies to both an outwards (as at present) and inwards
shipper bodies.
Item 55 Subsection 10.03(7) (Designated shipper bodies)
This item
adds references to the new subsections (2A) and (2B), provided under item 52, to
the ones in subsection 10.03(7) that are already subject to guidelines provided
in regulations.
Item 56 Section 10.05 – (Discrimination between shippers prohibited)
This item repeals section 10.05 that prohibits price discrimination as
between shippers in certain circumstances. The Government has agreed with the
Productivity Commission’s view that the price discrimination provisions of
Part X serve no useful purpose and indeed are potentially harmful if they
discourage efficient price discrimination. In addition, they would be extremely
difficult to implement.
Section 49 in Part IV of the Trade Practices Act
contained a similar provision to section 10.05, and was repealed in 1995 as not
being effective or efficient.
Items 57 and 58 Sections 10.06 and 10.07 – (Minimum standards for
conference agreements)
These items clarify that the current provisions in
sections 10.06 and 10.07 will apply only to an outwards conference agreement.
The application of section 10.07 to an inwards conference agreement is covered
under item 59, and the application of section 10.06 is covered under items 83
and 84.
Item 59 At the end of section 10.07 – (Minimum levels of shipping services to be specified in conference agreements)
This item adds a new subsection (2) requiring that an inwards conference
agreement specify minimum levels of service, as provided in the existing section
10.07. However, this provision is qualified under paragraph 10.33(1)(b), in
which the application of section 10.07 covering minimum levels of service does
not apply to an existing inwards conference agreement, or where an exemption
order has been issued under section 10.72A in respect of a new inwards
conference agreement (see note).
The new subsection (3) is a provision that
states that subsection (2) does not apply to inwards liner shipping services
that commenced before the end of the four-month transitional period, allowed
before the provisions applying to inwards liner shipping conference agreements
come into force.
Item 60 Paragraph 10.08(1)(d) – (Conference agreements may include
only certain restrictive trade practice provisions)
This item provides
that the existing paragraph 10.08(1)(d), which states that matters covered in
conference agreements must be necessary for the effective operation of the
agreement and of overall benefit to Australian exporters, apply to outwards (as
at present) and to inwards conference agreements in respect of
importers.
Item 61 Subsection 10.08(2) – (Conference agreements may include
only certain restrictive trade practice provisions)
This item provides
that the existing subsection 10.08(2) which states that any provisions in a
conference agreement concerning exclusive dealing cover Australian exporters (as
at present) and also Australian importers.
This item also includes a note
to the effect that paragraph 10.33(1)(ba) and section 10.72A qualify the
provisions in subsection 10.08(2), to the extent that this subsection does not
apply in relation to an inwards conference agreement because of an exemption
order, or because the agreement was an existing agreement at the time of the new
provision coming into force.
Item 62 At the end of section 10.08 – (Conference agreements may
include only certain restrictive trade practice provisions – new
subsection 10.08(4))
This item is a provision covering the transitional
four month period allowed before requirements covering inwards conference
agreements come into force. This provision will be repealed after the
transitional period has passed (see Part 2 of Schedule 1).
Item 63 At the end of paragraphs 10.11(1)(a), (b) and (c) – (What
registers are to be kept by the Registrar?)
This is a minor editorial
amendment to clarify that the Registrar is to keep a separate register for each
of the matters referred to in the paragraphs under subsection 10.11(1).
Item 64 At the end of subsection 10.11(1) – (Register of Exemption
Orders)
This item requires that a new register be kept by the Registrar
which is to contain details of any exemption orders issued by the Minister
concerning the application of conditions to inwards liner shipping conferences,
and referred to under item 141.
Items 65 and 66 Paragraphs 10.13(2)(a) and (b) – (Register to be
kept by the Commission)
This amendment expands the matters that must be
included in the register of investigations kept by the Commission, as a
consequence of the transfer of inquiry functions from the Australian Competition
Tribunal to the Australian Competition and Consumer Commission (ACCC).
Item 67 Section 10.14 – (Exemptions relating to conference agreements)
This item repeals the existing Section 10.14 and replaces it with new provisions applying to both outwards and inwards liner shipping conference agreements. These provisions specify the extent of exemptions granted to parties to registered liner shipping conference agreements, and cover the following activities:
• transport of cargo by sea;
• stevedoring services;
• activities that take place outside Australia;
• fixing of charges for inter-terminal transport services; and
• fixing of charges for inland terminal services provided to liner
shipping conferences.
Subsection (3) provides for the exemptions to also
extend to the determination of common terms and conditions for bills of lading
(these are evidence of a contract of carriage by sea) in respect of both outward
shipping conferences (as at present) and inward shipping conferences (as
previously provided under paragraph 10.22(2)(b)).
The present unconditional exemptions granted to inwards liner shipping conferences in Subdivision C of Division 5 are to be repealed under Part 2 of Schedule 1 (see item 159).
The new provisions include a new subsection (4) that makes it clear that the
exemptions in Subdivision A of Division 5 do not extend to allowing parties to a
liner shipping conference agreement to negotiate collectively with providers of
ancillary cargo services. An exemption to allow parties to a liner shipping
conference agreement to negotiate collectively with stevedores is provided in
Subdivision D of Division 5 (see item 78).
In recent years shipping lines
have been making increasing use of facilities beyond the traditional wharf
location. Cargo handling operations may take place at terminals on the
waterfront as well as at some inland terminal facility used for assembling
export cargo for delivery to a port, or delivering cargo to importers. In some
port approaches (eg Sydney) where there is considerable traffic congestion,
shipping lines are developing a practice of placing containers on rail wagons
and sending them to some inland facility before delivery to an importer takes
place. A reverse operation in respect of exports can also occur. The new
section 10.14 facilitates these multi-modal operations.
Item 67A Section 10.15 – (When do exemptions
commence to apply in relation to registered conference agreements?)
This
item adds a cross-reference in the first subsection of section 10.15 (covering a
registered outwards conference agreement) to the new sections 10.17A and 10.18A.
This has the effect of clarifying the intention that, while freight rate charges
do not have to be included in a registered conference agreement, parties to a
conference agreement are not permitted to collectively agree on freight rate
charges, or implement such agreed charges, unless this is done under the
Part X exemptions (from the competition rules in sections 45 and 47 of the
Trade Practices Act 1974) provided to parties to a finally registered
conference agreement.
Item 68 Section 10.15 – (When do exemptions commence to apply in
relation to registered conference agreements?)
This item provides that
the existing section 10.15, concerning the 30 day period before the Part X
exemptions for finally registered conference agreements come into effect,
applies only to outwards cargo shipping services. The mirror provision applying
to an inwards agreement is covered under item 69.
Item 69 At the end of Section 10.15 – (When do exemptions commence
to apply in relation to registered conference agreements?)
This item adds
inwards liner cargo shipping services to the provisions covering the 30 day
period allowed for conference agreements to come into effect, after they have
been finally registered. It also adds a cross-reference in the new subsection
10.15(2) (covering a registered inwards conference agreement) to the new
sections 10.17A and 10.18A.
Item 70 After Section 10.15 – (When do exemptions commence to apply
in relation to registered conference agreements?)
This item is a
transitional provision that suspends the application of the exemptions relating
to inwards conference agreements in Subdivision A of Division 5, during the four
month transitional period allowed before the provisions applying to an inwards
conference agreement come into force; or the end of the 30 day time
period allowed between a conference agreement being finally registered and the
agreement taking affect, whichever is the later time.
Items 70A and 70B Section 10.16 - (Exemptions do not apply to variations
of conference agreements unless varying agreement registered)
These items
have the same effect as those referred to under item 67A, except that they refer
to section 10.16.
Items 71 At the end of subsection 10.17(2) – (Exemptions from
sections 45)
This item provides that subsections 10.17(2) applies
to an inwards liner cargo shipping service as well as an outwards service (as at
present).
Item 71A Section 10.17A - (Exemptions from section 45 for freight rate agreements)
This item repeals the existing section 10.17A and replaces it with a new
section 10.17A, which makes it clear that the Part X exemptions (from the
competition rules in sections 45 of the Trade Practices Act 1974),
apply to the making of freight rate charges only if:
- the
parties to the agreement under which such freight rates were made (the
freight rate agreement), are the same as the parties to a
registered outwards or inwards conference agreement (or a varying outwards or
inwards registered conference agreement) to which those freight rates
apply.
Item 72 At the end of subsection 10.18(1) – (Exemptions from section
47)
This item provides that subsection 10.18(1) applies to an inwards
liner cargo shipping service as well as an outwards service (as at
present).
Item 72A Section 10.18A – (Exemptions from section 47 for freight rate agreements)
This item repeals the existing section 10.18A and replaces it with a new
section 10.18A, which makes it clear that the Part X exemptions (from the
competition rules in sections 47 of the Trade Practices Act 1974),
apply to the making of freight rate charges only if:
- the
parties to the agreement under which such freight rates were made (the
freight rate agreement), are the same as the parties to a
registered outwards or inwards conference agreement (or a varying outwards or
inwards registered conference agreement) to which those freight rates
apply.
Item 73 At the end of subsection 10.19(2)– (Exemptions from section
45 relating to loyalty agreements)
This item provides that subsection
10.19(2), applies to an inwards liner cargo shipping service as well as
an outwards service (as at present).
Item 74 Subsection 10.20(1) – (Exemptions from sections 47 and
10.05)
This is a consequential change resulting from the amendment under
item 56 that repeals section 10.05.
Item 75 At end of subsection 10.20(1) – (Exemptions from section 47)
This item provides that subsection 10.20(1) applies to an inwards
liner cargo shipping service as well as an outwards service (as at present).
Section 10.05 referred to in the present subsection 10.20(1) is to be repealed
(see item 56).
Item 76 After section 10.21 – (Transitional
arrangements)
This is a transitional arrangement covering the four month
transition period allowed for the provisions applying to an inwards conference
agreement to come into force.
Item 77 At the end of section 10.24 – (Transitional
arrangements)
This is a transitional arrangement to allow for the four
month transition period allowed for the provisions applying to an inwards
conference agreement to come into force.
Item 78 After section 10.24 (New section 10.24A – Exemptions from sections 45 & 47 in relation to stevedoring contracts)
This amendment is a consequence of the need to clarify the fact that stevedoring operations are part of the normal terminal to terminal services provided by shipping conference lines, and as such are part of the conditional exemptions granted to shipping conferences under Part X.
At present there is some uncertainty as to whether Part X provides exemptions
for conference lines to negotiate collectively with stevedores for the provision
of stevedoring services to member lines of conferences. This has been a common
practice for many years.
Accordingly, this item confirms approval for the
existing practice whereby members of shipping conferences negotiate collectively
with stevedores. The reason for this is that where a group of shipping lines
act collectively through a conference agreement when negotiating with
stevedores, the conference lines are able to offer a much larger volume of
cargo. This can give the conference lines considerable leverage in negotiating
a more favourable stevedoring rate than would be the case if shipping lines were
to negotiate individually with stevedores. It should be noted than in Australia
the vast majority of stevedoring services are under the control of only two
companies (P&O Ports and Patrick), and as such these companies are in a
strong bargaining position.
Item 79 Subsection 10.27(1) – (Application for provisional
registration of conference agreements)
At present section 10.27(1) does
not require that minimum levels of service be included in an outwards shipping
conference agreement when submitted for provisional registration (the minimum
levels of service are only required to be stated before final registration).
The amendment under this item extends this provision to an inwards conference
agreement.
Item 80 After section 10.27 – (Copies of conference agreements to be
sent to shipper bodies)
This item introduces a new section 27A that
requires parties to an outwards and inwards conference agreement to send copies
of such agreements to the designated outwards peak shipper body or the
designated inwards peak shipper body as appropriate, when parties to a
conference agreements apply for provisional registration of such agreements.
Item 81 At the end of paragraph 10.28(1)(a) – (Provisional
registration)
This item is of an editorial nature to make clear that the
Registrar must be satisfied in respect of all the matters in paragraphs in 10.28
(1) (a), (aa), (ab), (b) and (c).
Item 82 After paragraph 10.28(1)(a) – (Provisional
registration)
This item provides that the requirement that applications
for provisional registration of conference agreements have been properly made,
apply to an inwards agreement, as well as an outwards agreement (as at
present).
Items 83 and 84 Paragraph 10.28(1)(b) – (Provisional
registration)
These items provide that section 10.06 applies only to an
outwards conference agreement. This is because section 10.06 provides that
disputes between parties to an outwards conference agreement are to be
determined in accordance with Australian law. This is reasonable because
outwards conference agreements are entered into in Australia. However, this is
not the case with an inward conference agreement because they are entered into
in another country, and for this reason parties to an inwards conference
agreement are not being required to comply with section 10.06.
Item 85 After paragraph 10.28(1)(b) – (Provisional
registration)
This item inserts a new paragraph (ba) into subsection
10.28(1) as a facility to enable the Registrar to deal with any existing
inwards conference agreement, which may appear to him/her to contain provisions
that are totally unacceptable in terms of the objects of
Part X.
If such a situation should arise, the Registrar would be in a
position to refer the matter to the Minister for approval under a regulation
preventing an inwards conference agreement from being registered with such
unacceptable provisions. It is intended that such a regulation will be made
prior to the amendments concerning inwards conferences coming into force.
Item 86 At the end of section 10.28 – (Provisional
registration)
This item inserts a specific legal requirement for the
Registrar to provide the ACCC with copies of documents submitted as part of the
processes for provisionally registering conference agreements. This has been
common practice in the past, but it is considered appropriate to formalise
it.
Items 87 and 88 Subsection 10.29(1) – (Parties to conference
agreements to negotiate minimum level of shipping services after provisional
registration of agreement)
These items confine the existing Subsection
10.29(1), concerning the requirement for parties to a provisionally registered
conference agreement to negotiate on minimum levels of service, to outwards
conferences. A mirror provision applying to an inwards conference agreement is
provided under item 89.
Item 89 After subsection 10.29(1) (Minimum levels of service)
This item adds a new subsection 10.29(1A) that extends the requirements to
negotiate minimum levels of service during the provisional registration period
to an inwards conference agreement.
It is important to note that under the
item covering amendments to paragraph 10.33(1)(b), the requirement to
negotiate minimum levels of service under section 10.07 will not apply to
existing inwards conference agreements. However, in respect of new inwards
agreements, section 10.07 may be made not to apply because of an exemption order
made pursuant to the new section 10.72A referred to under item 141.
Item 90 Before subsection 10.29(2) – (Parties to conference agreements to negotiate minimum level of shipping services after provisional registration of agreement)
This item introduces a new subsection 10.29(1B), which states that the
requirements to negotiate minimum levels of service will not apply unless,
within 14 days after provisional registration, the relevant shipper body
notifies the Registrar that it does wish to have such negotiations.
The
effect of this provision is that shipper bodies will no longer have to send a
written notification (duly witnessed by a JP) if they do not wish to negotiate
minimum levels of service. This will automatically be assumed if they do not
respond within the 14 day period. However, as at present the designated peak
shipper bodies will be able to call for negotiations on minimum levels of
service any time during the 14 days following provisional registration.
Item 91 Subsection 10.29(2) – (Parties to conference agreements to
negotiate minimum level of shipping services after provisional registration of
agreement)
This is a consequential change resulting from the introduction
of a new subsection 10.29(1A) concerning negotiating requirements in respect of
minimum levels of service. It has the effect of making the current subsection
10.29(2) apply to both the existing subsection 10.29(1) as well as the
new subsection 10.29(1A).
Item 92 At the end of paragraph 10.33(1)(a) – (Decision on
application for final registration)
This item is of an editorial nature
to make clear that the Registrar must be satisfied in respect of all the matters
in paragraphs 10.33 (1) (a), (b), (ba) and (c), concerning criteria to be
satisfied before finally registering a conference agreement.
Item 93 Paragraph 10.33(1)(b) – (Decision on application for final
registration)
The effect of this amendment is to change the current
matters that the Registrar must take into account before finally registering a
conference agreement. The changes provide new provisions in paragraphs 10.33
(1) (b) and (ba), which recognise that exemption orders under the new section
10.72A (see item 141) may exempt an existing inwards conference agreement from
complying with sections 10.07 (concerning minimum levels of service) and 10.08
(concerning matters that may be included in an agreement).
Item
94 Paragraph 10.33(1)(c) – (Decision on application for final
registration)
This item extends the current matters that the Registrar
must take into account before finally registering a conference agreement, so
that the requirement covering the negotiation of minimum levels of service under
subsection 10.29 (1) applies to both outwards and inwards conference agreements,
unless such requirements do not apply in respect of a particular agreement.
Item 95 At the end of section 10.33 – (Decision on application for
final registration)
This item inserts a specific legal requirement for
the Registrar to provide the Australian Competition and Consumer Commission
(ACCC) with copies of finally registered conference agreements. This has been
common practice in the past, but it is considered appropriate to formalise
it.
Items 96 and 97 Subparagraph 10.37(1)(c)(i) – (Decision on request
for confidentiality)
These items provide that the confidentiality
provision currently in subparagraph 10.37(1)(c)(i) will apply to both an
outwards (as at present) and an inwards conference agreement.
Item 98 Subparagraphs 10.40(1)(b)(i) and (ii) – (Notification of
happening of affecting events prior to final registration)
This item
extends the provisions currently in subparagraph 10.40(1)(b)(i) and (ii),
concerning notification of the happening of an event affecting a provisionally
registered conference agreement, to both an outwards (as at present) and an
inwards conference agreement.
Item 99 Subsection 10.41(3) – (Requirements for conferences to negotiate with designated shipper bodies)
This item repeals the existing subsection 10.41(3) that identifies and defines those shipping arrangements on which parties to outwards conference agreements have to negotiate with the relevant designated shipper body. In its place a new subsection 10.41(2A) has been included as a transitional arrangement. This has the effect of delaying the application of the negotiating requirements, in respect of inward liner shipping conferences, until after the four month transitional period allowed for inward conferences to register their agreements has expired.
There are also two new provisions. The first one in subsection 10.41(3 ) covers:
• a definition of an eligible Australian contract to mean a contract entered into in Australia or a contract where questions arising under the contract are to be determined in accordance with Australian law. The term ‘eligible Australian contract’ is used in relation to the ‘negotiable shipping arrangements’ on which inwards shipping conferences are required to negotiate with designated importer bodies and referred to in subparagraph 10.41(3)(b)(i) of the definition of ‘negotiable shipping arrangements’;
• a definition of freight rates to include base freight rates, surcharges, rebates and allowances; and
• outwards agreements, which is the same as the present provision
except that charges for inter-terminal transport services, have been added to
the examples of negotiable shipping arrangements.
The second
new provision in subparagraph 10.41(3)(b) under the definition of
negotiable shipping arrangements covers inwards conference
agreements. The matters subject to negotiation are the same as for an outwards
agreement, except that the provisions in subparagraph 10.41(3)(b)(i) only apply
in cases where the contract for the inwards shipping service was made in a
market in Australia. The provisions in subparagraph 10.41(3)(b)(ii) require
that land based activities in Australia that are part of the inwards shipping
service (eg. terminal handling charges, and charges for inter-terminal transport
services), are subject to the negotiating requirements in
Part X.
Also, the provisions in subsection 10.41(3) that define the
meaning of relevant designated shipper body, have been expanded to
cover outwards (as at present) and inwards peak (and secondary, if nominated by
the Registrar) shipper bodies. The new subsection 10.41(2A) is a transitional
provision that will be repealed after the four month period allowed for an
inwards conference agreement to be registered has expired.
Item 100 Paragraphs 10.43(1)(a) and (b) – (Parties to registered
conference agreement to notify happening of affecting events)
This item
extends the provisions currently in paragraphs 10.43(1)(a) and (b) concerning
notification of the happening of an event that affects a registered conference
agreement, to both an outwards (as at present) and an inwards conference
agreement.
Item 101 At the end of section 10.43 – (Parties to registered
conference agreement to notify happening of affecting events)
The new
subsection 10.43(5) is a transitional provision that will be repealed after the
four month period allowed for an inwards conference agreement to be registered
has expired.
Item 102 At the end of section 10.44 – (Powers of Minister in relation to registered conference agreements)
This amendment is related to the amendments under items 106 and 108 concerning the additional enforcement powers to be given to the Minister to deal with exceptional circumstances
The amendment adds a new subsection 10.44(8) that requires the Minister to table in Parliament a statement of his/her decision concerning enforcement action against parties to a registered conference agreement, together with a copy of the related ACCC report..
Guidance on interpreting the term ‘exceptional circumstances’ is provided in the Second Reading Speech, an extract of which is at item 108.
Item 103 Sub paragraphs 10.45(1)(a)(i) and (ii) – (Circumstances in
which Minister may exercise enforcement powers)
This item replaces sub
paragraphs 10.45(1)(a)(i)(A) concerning requirements in section 10.06
(application of Australian law to conference agreements) so that they apply only
to outwards conference agreements (see items 83 and 84). The other changes
under this item only involve restructuring the text with no change to the
substance.
Item 104 Sub paragraph 10.45(a)(iv) – (Circumstances in which
Minister may exercise enforcement powers)
This item extends the
provisions currently in paragraphs 10.45(1)(a)(iv) concerning the main grounds
on which the Minister may deregister a conference agreement to both an outwards
(as at present) and inwards conference agreement.
Item 105 Sub paragraph 10.45(a)(v) – (Circumstances in which
Minister may exercise enforcement powers)
This item amends sub paragraphs
10.45(1)(a)(v) concerning the hindering of Australian flag shipping from
engaging efficiently in the provision of liner shipping services, so that it
continues to apply to an outwards conference agreements (as at present), but
will not apply to an inwards agreement.
Item 106 After sub paragraph 10.45(a)(vii) – (Circumstances in which
Minister may exercise enforcement powers)
This item adds two
sub-paragraphs - (viii) and (ix) – which provide the Minister with two
additional grounds for deregistering a conference agreement. The first is
covered by a new subsection 10.45 (3) that relates to the additional powers to
deal with exceptional circumstance that may arise in respect of the operation of
registered conference agreements. The second is covered in a new subsection
10.45 (4) and relates to a conference unreasonably refusing to admit a new
shipping line to a shipping agreement. Item 108 covers both these
situations.
Item 107 After paragraph 10.45(a) – (Notice of intention to
deregister a conference agreement)
This amendment requires the Minister
to give 21 days notice to the parties of a registered agreement if he/she
intends to deregister that agreement under the new provisions referred to under
item 106. These relate to the increased powers to be granted to the Minister
under the amendments referred to in item 108.
Item 108 At the end of section 10.45 – (Minister’s powers in relation to registered conference agreements)
The proposed new subsection 10.45 (2) requires that the Minister have regard to the national interest in deciding whether to exercise his/her powers in cases where, parties to a registered agreement, may have taken actions that prevent or hinder an Australian flag shipping operator from engaging efficiently in the provision of outwards liner shipping services.
The new subsection 10.45(3) provides the Minister with increased powers to suspend a conference agreement where all of the following situations exist:
(a) the agreement substantially lessens competition;
(b) the parties to the agreement have actually engaged in conduct that
substantially lessens competition;
(c) the conduct has or is likely to
result in detriment to the public interest that outweighs the public benefits of
the agreement; and
(d) there are exceptional circumstances that warrant
the giving of a direction under subsection
10.44(1)[2].
Guidance on interpreting the term ‘exceptional circumstances’ is provided in the Second Reading Speech. The following is the relevant extract:
‘As a guideline for exercising the additional powers, exceptional circumstances will be taken to apply where:
• an agreement has the effect of giving its parties a substantial degree of market power;
• the conduct of the parties to the agreement has led to, or is likely to lead to, an unreasonable increase in freight rates or an unreasonable reduction in services; and
• the anti-competitive detriment of the agreement outweighs the benefit to shippers flowing from the agreement.
Exceptional circumstances will also be taken to apply where the agreement in question is substantially similar to one that has previously been deregistered pursuant to section 10.44 of Part X.’
The new subsection 10.45(4) allows the Minister to exercise his/her powers to
suspend a conference agreement in cases where the parties to such an agreement
unreasonably attempt to prevent a new shipping line from joining the conference.
The reason for this amendment is to ensure that shipping conferences are
reasonably open to new entrants who are prepared to abide by the rules of the
conference, and provide the standards of service to which the conference in
question has committed itself.
Items 109 and 110 Subsections 10.46(1) and 10.46(3) – (Action to be
taken where powers exercised by Minister without first obtaining Commission
report)
This is a consequential amendment arising from the introduction
of more than one subsection in section 10.45.
Item 111 At the end of subsection 10.46(7) – (Action to be taken where powers exercised by Minister without first obtaining Commission report)
This item makes it a legal requirement for the Registrar to inform the
parties where the Minister decides to revoke a decision he/she took to
deregister an agreement prior to receiving a report from the Australian
Competition and Consumer Commission (ACCC).
The reason for this amendment is
that after receiving a report from the ACCC, the Minister might decide that
deregistration of the agreement in question is not appropriate.
Item 112 At the end of section 10.46 – (Action to be taken where
powers exercised by Minister without first obtaining Commission
report)
This amendment is required as a consequence of the fact that
decisions by the Minister under Part X concerning parties to a registered
conference agreement, and that affect relevant industry parties, will be
reviewable by the Australian Competition Tribunal. The processes under this
amendment will require the Minister to table in the Parliament his/her reasons
for taking enforcement action against a conference and to also table the
ACCC’s report on the matter in question.
Items 113 and 114 Subsections 10.47(1) and 10.48(1) – (Investigation
and report by Commission and reference by Minister)
As for items 109 and
110, these are consequential amendments arising from the introduction of more
than one subsection in section 10.45.
Item 115 Subsection 10.48(2) – (Investigation and report by
Commission on application by affected person)
The purpose of this
amendment is to distinguish between how the ACCC responds to requests for an
investigation by an affected party as provided under subsection 10.48(2), and
action to investigate a situation on its own initiative, which is to be provided
under the new subsection 10.48(2A), referred to under item 116.
Item 116 After subsection 10.48(2) – (Investigation and report by
Commission on application by affected person)
This amendment gives the
ACCC powers to undertake investigations on its own initiative into shipping
conference activity that falls under the category of ‘exceptional
circumstance’ as referred to under item 102.
Item 117 Paragraph 10.48(5)(c) – (Investigation and report by Commission on application by affected person)
This item amends sub paragraph 10.48(5)(c) concerning persons that may apply to the ACCC for an investigation into the conduct of parties to a registered conference agreement, so that it continues to apply to users of Australian flag shipping (as at present).
This amendment is needed because some of the amendments to paragraph 10.45(a)
will apply only to an outwards liner shipping conference (as at present) and
others to both an outwards and an inwards shipping conference. The amended
subparagraph 10.45 (a)(v), concerning Australian flag shipping, will continue to
apply to outwards liner shipping services.
The Government has decided that as
far as practicable the protection afforded to exporters under Part X should be
extended to importers. As subparagraph 10.48(5)(c) does not affect the rights
afforded to importers under Part X, there is no need to extend it to cover
inwards conference agreements.
Item 118 Paragraph 10.48(5)(d) – (Investigation and report by
Commission on application by affected person)
This item extends the
provisions currently in paragraphs 10.48(5)(d) concerning persons that may apply
to the ACCC for an investigation into the conduct of parties to a registered
conference agreement, so that it applies to both an outwards (as at present) and
an inwards conference agreement.
Item 119 After section 10.49 – (Undertakings by parties to a registered conference agreement)
This amendment makes provision for more effective and flexible enforcement of
undertakings given by conference lines in return for the Minister not
deregistering, or suspending, a conference agreement for breaches of the
conditions in Part X.
While the enforcement provisions in Part X have been
resorted to very infrequently, a greater range of sanctions would be useful, and
will further encourage conference members to abide by the rules, and facilitate
the commercial resolution of disputes between conferences and shippers (ie.
exporters and importers.
Items 120 and 121 Subsection 10.50(1) – (Inquiries into market power
of non-conference ocean carriers)
These items change references to the
Australian Competition Tribunal to mean the Australian Competition and Consumer
Commission. This is a consequence of the transfer of inquiry functions from the
Tribunal to the ACCC.
Item 122 Subsection 10.50 (1) – (Inquiries into market power
of non-conference ocean carriers)
This item extends the provisions
currently in subsection 10.50 (1) concerning inquiries as to whether a
non-conference carrier has substantial market power, so that it applies to both
outwards (as at present) and inwards liner cargo shipping services.
Items 123 and 124 Subsections 10.50 (2) and (3) – (Inquiries into
market power of non-conference ocean carriers)
These items change
references to the Australian Competition Tribunal to mean the Australian
Competition and Consumer Commission (ACCC). This is a consequence of the
transfer of inquiry functions from the Tribunal to the ACCC.
Item
125 Paragraph 10.51(1)(a) – (Determination by Minister of market power of
ocean carriers)
This item changes references to the Australian
Competition Tribunal to mean the Australian Competition and Consumer Commission
(ACCC). This is a consequence of the transfer of inquiry functions from the
Tribunal to the ACCC.
Item 126 Paragraph 10.51(1)(a) – (Determination by Minister of
market power of ocean carriers)
This item extends the provisions
currently in paragraph 10.51 (1)(a) concerning a determination by the Minister
that a non-conference carrier has substantial market power, so that it applies
to both outwards (as at present) and inwards liner cargo shipping
services.
Item 127 After subsection 10.52(2) – (Non-conference ocean carriers
with substantial market power to negotiate with certain designated shipper
bodies)
The new subsection 10.52(2A) is a transitional provision that
delays the implementation of amendments concerning the requirements for a
non-conference carrier with substantial market power to negotiate with the
relevant designated shipper body, until after the four month period allowed for
an inwards conference agreement to be registered. This provision will be
repealed after the transitional period has expired.
Item 128 Subsection 10.52(3) – (Non-conference ocean carriers with
substantial market power to negotiate with certain designated shipper
bodies)
This item adds a definition of eligible Australian
contract to the provisions covering the obligation of a non-conference
carrier with substantial market power to negotiate with certain designated
shipper bodies. The definition of an eligible Australian contract
means a contract entered into in Australia or a contract where questions arising
under the contract are to be determined in accordance with Australian law. The
term ‘eligible Australian contract’ is used in the amended
subsection 10.52(3) and is similar to the amendment to subparagraph 10.41(3)
(see item 99).
Item 129 Subsection 10.52(3) – (Non-conference ocean carriers with
substantial market power to negotiate with certain designated shipper
bodies)
Item 129 states that freight rates include
base freight rates, surcharges, rebates and allowances.
Items 130 and 131 Subsection 10.52(3) – (Non-conference ocean
carriers with substantial market power to negotiate with certain designated
shipper bodies)
These items are basically mirrors of the provisions
referred to under item 99 concerning definitions of negotiable shipping
arrangements and relevant designated shipper body, so
that they apply to the obligations for non-conference carriers with
substantial market power to negotiate with shippers.
Item
132 At the end of section 10.53 – (Non-conference ocean carrier with
substantial market power not to hinder Australian flag shipping
operators)
This amendment requires that the Minister have regard to the national interest in deciding whether to exercise his/her powers in situations where a registered non-conference carrier with substantial market power, may have taken actions which prevent or hinder an Australian flag shipping operator from engaging efficiently in the provision of outwards liner shipping services.
The amendment is similar to the one referred to under item 108 in respect of
the proposed new subsection 10.45 (2), except that in section 10.53 it applies
to ocean carriers with substantial market power instead of parties to a
conference agreement.
Items 133 Paragraph 10.55 (a) – (Circumstances in which the Minister
may exercise powers)
This item is needed because the amendments to
sections 10.52 and 10.53 (referred to under items 130, 131 and 132) take account
of differences between an outwards and an inwards conference, in respect of the
circumstances in which the Minister may exercise his/her enforcement powers in
relation to non-conference ocean carriers with substantial market power.
Item 134 At the end of subsection 10.56(6) – (Action where powers
exercised by Minister without Commission report)
At present there is no
legislated requirement for the Registrar to send a copy of any directions the
Minister may make in respect of the conduct of a non-conference ocean carrier
with substantial market power, to the carrier concerned. This amendment
rectifies that situation by requiring the Registrar to send a copy of the
direction to the ocean carrier concerned.
Item 135 Paragraph 10.58(5)(b) – (Investigation and report by
Commission on application by affected person)
This item amends sub
paragraph 10.58(5)(b) concerning persons that may apply to the Australian
Competition and Consumer Commission (ACCC) for an investigation into the conduct
of a non-conference carrier with substantial market power, so that it continues
to apply to operators of Australian flag shipping (as at present). The reasons
for this amendment are similar to the ones given in respect of the amendment to
subparagraph 10.48(5)(c) concerning conference carriers (see item 117).
Item 136 Paragraph 10.58(5)(c) – (Investigation and report by
Commission on application by affected person)
This item extends the
provisions currently in paragraphs 10.58(5)(c) concerning persons that may apply
to the ACCC for an investigation into the conduct of a non-conference carrier
with substantial market power, so that it applies to both an outwards (as at
present) and an inwards conference agreement.
Item 137 Paragraph 10.62(c) – (Circumstances in which Minister may
exercise powers)
This item changes the reference to the Australian
Competition Tribunal to mean the Australian Competition and Consumer Commission
(ACCC), as a consequence of the transfer of inquiry functions from the Tribunal
to the Commission.
Items 138 and 139 Section 10.63 – (Inquiry and report by
Tribunal)
These items change references to the Australian Competition
Tribunal to mean the ACCC because of the transfer of inquiry functions from the
Tribunal to the Commission.
Item 140 Paragraph 10.64(3)(a) – (Undertakings not to engage in
pricing practices)
This item changes the reference to the Australian
Competition Tribunal to mean the ACCC because of the transfer of inquiry
functions from the Tribunal to the Commission.
Item 141 After Division 12 (new sections 10.72A to D) – (Exemption orders)
This item introduces new sections 10.72A, B, C, and D that allow the Minister to make exemption orders under specified criteria in respect of matters relating to an inwards conference agreement. The reason for these provisions is to enable the Minister to deal with conflicts of jurisdiction that may arise in relation to an inwards conference agreement that operates under exemptions (or anti-trust immunities) granted in the country of export.
Our major trading partners including USA, Japan, European Union (EU) and New Zealand grant exemptions to allow liner shipping companies to collaborate as conferences under specified conditions. It is a generally accepted principle of international comity that the country of export has a greater interest in regulating liner shipping conferences than the country of import. Nevertheless, countries also have a legitimate interest in exercising an appropriate level of control over inwards liner shipping conferences. The USA and EU exercise jurisdiction over inwards and outwards liner shipping conferences.
While Australia also has a legitimate interest in ensuring that the conduct of an inwards liner shipping conference provides adequate benefits to Australian importers, care will need to be taken in the application of the new provisions in Part X covering inwards conferences. This will be necessary so that to the extent consistent with Australia’s trading interests, international obligations, and relevant principles of international law, possible conflicts between the relevant laws in the country of export and Australia’s laws can be effectively and efficiently dealt with, without the need for expensive litigation.
The exemption provisions have been limited to the minimum needed to deal with possible conflicts of jurisdiction, and under subsection 10.72A(4) are as follows:
(a) Subsection 10.07(2) concerning minimum levels of service. This exemption is needed to deal with situations such as where the levels of service are acceptable in the country of export, but Australian importers seek different service levels that could not reasonably be accommodated, taking into account the impact on costs and service levels for exporters.
(b) Section 10.08 concerning matters that may be included in
conference agreements. This exemption is needed to deal with situations such as
where the content of an agreement is acceptable in the country of export, but
this falls outside the matters allowed in section 10.08.
(c) Paragraph
10.28(1)(ba) concerning the responsibility given to the Registrar to hold up
the registration of an existing (eg. one approved in the country of export)
inwards shipping conference agreement in cases where a particular agreement may
contains provisions that are unacceptable to Australia. Where such a situation
arises, the
Registrar is required to refer the matter to the Minister for
decision under a regulation to be made to prevent such an agreement being
registered.
(d) Subsection 10.29(1A) concerning the requirement
for parties to an inwards conference agreement to negotiate on minimum levels of
service before such an agreement is finally registered. This exemption is
needed for the same reason as given for subsection 10.07(2).
(e) Section 10.40 concerning the requirement for parties to an inwards conference agreement to notify the Registrar of the happening of an event affecting a particular inwards agreement prior to its final registration. This is to cover situations such as where a foreign country may prohibit the disclosure of relevant shipping information to another country.
(f) Section 10.41 (as amended) concerning the requirement that parties to a conference agreement negotiate with the relevant designated inwards shipper body whenever reasonably requested to do so by that body. This exemption is needed to deal with situations such as where negotiations would not be reasonable, because these have already taken place in the country of export and an acceptable agreement has been reached.
(g) Section 10.43 concerning the requirement for parties to an inwards conference agreement to notify the Registrar of the happening of an event affecting a particular registered inwards agreement. This is to cover situations such as where a foreign country may prohibit the disclosure of relevant shipping information to another country.
(h) Subparagraph 10.45(1)(a)(iv) (as amended) concerning the main grounds on which the Minister may deregister an inwards conference agreement (ie. services not being efficient, economical and adequate, or there are exceptional circumstances). This exemption is needed to deal with situations such as where it would be in the interest of Australia’s international trading considerations, for an issue concerning the deregistration of an inwards conference agreement to be negotiated with the country of export;
- the aim of such negotiations would be to find a mutually acceptable way of dealing with conduct by parties to an inwards conference agreement that Australia may not consider appropriate. For Australia to act alone in such a situation could well lead to retaliatory action by the country of export that could harm the interests of Australian exporters, as these could be interpreted (reasonably or unreasonably) as interfering in another country’s export trades;
(i) Subsection 10.45(3) –(a new subsection) concerning the Minister’s additional powers to deregister a conference agreement. Conflicts of jurisdiction could arise if the country of export continues to authorise the agreement in question.
(j) Subsection 10.45(4) –(a new subsection) concerning the
conditions applying to the admission of new shipping lines to a shipping
conference. The country of export could well have different rules governing
such situations.
(k) Section 10.52 (as amended) concerning the
requirement that non-conference carriers with substantial market power negotiate
with the relevant designated inwards shipper body, whenever reasonably requested
to do so by that body. The reasons for this exemption are the same as the ones
stated in respect of section 10.41.
The provision covering exemption orders can be disallowable by Parliament and is subject to the criteria listed in the new section 10.72B. The main criterion is that the exemption order must be in the national interest. In this regard, a list of factors the Minister is required to have regard to is given in subsection 10.72B(2).
Section 10.72C allows for a time limit to be placed on an exemption order and
the new section 10.72D allows for conditions to be imposed in respect of
exemption orders.
Item 142 Section 10.81 – (Delegation by
Minister)
This item adds to the list of powers the Minister cannot
delegate, the new section 10.02A concerning a declaration of an inland terminal
facility (see item 49).
Item 143 Section 10.81 – (Delegations by Minister)
This item
adds the new section 10.72A (Exemption Orders) to the list of Ministerial powers
that cannot be delegated.
Item 144 After section 10.82 – (New sections covering reviews of
decisions)
This item brings the review mechanism in Part X into line with
other parts of the Trade Practices Act. It introduces Divisions 14A and 14B
covering decisions of the ACCC and the Minister that are to be reviewable by the
Tribunal, and the functions and powers of the Tribunal in relation to reviewable
decisions.
Under the new section 10.82A, a decision by the Commission not to hold an investigation into a matter referred to it by an affected party under sections 10.48(2) and 10.58(2), and decisions under section 10.88 concerning the exclusion of documents or particulars of a submission from the register of Commission investigations, will become reviewable.
Under the new section 10.82B, the Tribunal may affirm, set aside or vary a
decision of the Commission. A decision of the Tribunal will substitute for the
decision of the Commission.
The new section 10.82C is being introduced to
remove any doubt that some parts of Division 1 of Part IX of the Trade
Practices Act 1974 might apply under Part X. The provisions in Part X
relating to reviews by the Tribunal are self-contained. However, as the note
under the new section 10.82B states, the provisions that deal with the
Tribunal’s procedures under Division 2 of Part IX of the TPA will
apply.
Under the new section 10.82D decisions by the Minister that affect the
interests of conference shipping lines, and/or users of their services, will be
reviewable by the Tribunal. The major reviewable decisions will be those
relevant to deregistering or suspending the operation of a registered conference
agreement. Such decisions have the effect of removing the conditional Part X
exemptions (from the competition rules of the Trade Practices Act 1974)
granted to liner shipping companies to allow them to collaborate as conferences
in providing joint services to shippers (ie exporters and importers or their
representatives).
Under the new section 10.82E the Tribunal may affirm, set aside or vary a decision of the Minister. A decision of the Tribunal will substitute for a decision of the Minister. The new section 10.82F provides the mechanism by which the Minister directs the Registrar to give effect to decisions of the Tribunal.
The new section 10.82G is being introduced to remove any doubt that some
parts of Division 1 of Part IX of the Trade Practices Act 1974 might
apply under Part X. The provisions in Part X relating to reviews by the
Tribunal are self-contained. However, as the note under the new section 10.82B
states, the provisions that deal with the Tribunal’s procedures under
Division 2 of Part IX of the TPA will apply.
Item 145 Paragraph 10.87(a)
– (Notification of Commission’s investigations)
This
amendment is required as a consequence of the transfer of investigation powers
of the Australian Competition Tribunal under sections 10.50 and 10.63, to the
Australian Competition and Consumer Commission (ACCC). It increases the scope
of references for investigations that the Commission may make public.
Item 146 Paragraph 10.87(b) – (Notification of Commission’s
investigations)
This amendment will allow the ACCC to make public its
investigations that it undertakes on its own initiative under the new subsection
10.48(2A.
Item 147 Subsection 10.88(7) – (Exclusion of documents
from register of Commission investigations)
This amendment is
required as a consequence of the transfer of the investigation powers of the
Australian Competition Tribunal under sections 10.50 and 10.63 to the Australian
Competition and Consumer Commission (ACCC). It expands the list of documents
and submissions that the Commission may exclude from its register of
investigations, due to the confidential nature of matters contained in those
documents or submissions.
Items 148 to 151 Paragraphs 10.90(2)(a), (b), (c) and (ca), and (d) – (Fees)
These items increase the maximum levels that may be charged for functions
relating to registering agreements to take account of higher costs that may
occur over the next ten years. The current limits were set under the 1989
amendments to Part X and current fees are only just under these limits.
Changes in fees up to the permitted level are given effect through
regulations.
Item 152 Section 10.92 – (Constitution of Tribunal for inquiries
under Part X)
Details of the constitution (ie. membership) of the
Tribunal for inquiries under Part X are repealed by this item. These details are
redundant as a consequence of the transfer of inquiry functions from the
Tribunal to the ACCC.
Item 153 Section 10.93 – (Participation in inquiries by Tribunal
under Part X)
This item repeals section 10.93 covering inquiries by the
Tribunal under Part X. This section is redundant as a consequence of the
transfer of inquiry functions from the Tribunal to the ACCC.
Part 2, (Schedule 1) – Amendments commencing not earlier than 4
months after the commencement of Part 1
This part contains the amendments
that will fully apply Part X to inwards liner shipping conferences. This Part
will apply after a 4month transitional period, that will give inwards liner
shipping conferences time to register their agreements.
Item 154 Subsection 10.02(1) – (Interpretation of Part X)
This item extends the definition of pricing practice to apply to both an outwards and inwards liner cargo shipping service.
Items 155 to 158 (Repeal of Transitional provisions)
These items
repeal the various transitional provisions that delay the implementation of
amendments concerning an inwards conference agreement, until after the
four month period allowed for an inwards conference agreement to be registered,
has expired.
Item 159 Repeal of Subdivision C of Division 5 of Part X –
(Exemption relating to inwards liner cargo shipping services)
This item
repeals the current unconditional exemptions granted to an inwards liner
shipping conference. Under other amendments in the Bill, these provisions have
been incorporated into sections 10.14, 10.17, and 10.18. The result of theses
changes is that the exemptions granted to an inwards liner shipping conference
will be subject to similar conditions (eg. obligations to negotiate with shipper
bodies) as apply to an outwards liner shipping conference.
Items160 to 164 (Repeal of Transitional provisions)
These items
repeal the various transitional provisions that delay the implementation of
amendments concerning inwards conference agreements, until after the four
month period allowed for inwards conference agreements to be registered has
expired. This will remove from Part X those transitional provisions that will
become unnecessary.
Items 165 to 169 Division 11 – (Unfair pricing)
These items
provide that amendments covering unfair pricing practices in Division 11 of Part
X will not apply to inwards liner cargo shipping conferences until after the
four months allowed for registering the agreements covering those
conferences.
Item 170 At the end of subsection 10.72A(4) – (Circumstances in
which Minister may exercise powers)
This item adds subparagraph
10.62(a)(i), concerning unfair pricing practices by parties to an inwards
conference agreement, to the list of provisions subject to exemption orders
under the new section 10.72A. These will not come into force until after the
four month period allowed for inwards conferences to register their
agreements.
This part contains the various provisions that deal with transitional
arrangements concerning inwards liner shipping conferences. In short, they
preserve notices, directions and other Ministerial actions under sections of
Part X that are to be repealed and replaced by similar provisions.
Items 171 and 172 Subsections 10.03(1) and (2) – (Designation of a shipper body)
These are transitional provisions of a purely technical nature to ensure that
declarations under subsections 10. 03(1) and (2) of a designated peak shipper
(DPSB) body, or a designated secondary shipper body (DSSB), that are in force in
respect of outwards liner shipping services immediately before the new
provisions covering negotiating rights for importers, remain in force.
The
reason for this is that, at present, the name given to a DPSB and a DSSB does
not state specifically that the designation is in respect of an outwards liner
cargo shipping service; this is taken to be the case from the wording in
sections 10.03. However, with the amendments to those sections referred to
under items 11 to 16, a DPSB or a DSSB will be designated for the purpose of
provisions covering an outwards liner cargo shipping service or inwards liner
cargo shipping service.
Items 173 and 174 Sections 10.29 and 10.41 – (Nominations by
Registrar)
The reason for these items is similar to the ones given in
respect of items 171 and 172, except that it applies to notices under section
10.29 and subsection 10.41(3), concerning the nomination by the Registrar of a
designated shipper body for the purpose of negotiations with parties to a
conference agreement.
Item 175 Section 10.44 – (Directions by Minister)
The reason
for these items is similar to the one given in respect of items 171 and 172,
except that it applies to directions the Minister may give under section 10.44
concerning the deregistration of conference agreements.
Item 176 Section 10.52 – (Non-conference ocean carrier with
substantial market power to negotiate with certain designated shipper
bodies)
The reason for this item is also similar to the one given in
respect of items 171 and 172, except that it applies to directions the Minister
may give under section 10.52, concerning the requirement for a non-conference
carrier with substantial market power to negotiate with the relevant designated
shipper body.
Item 177 (References to the Tribunal)
This is a transitional provision of a technical nature to ensure that references to the Australian Competition Tribunal (ACT) for an inquiry concerning an outwards liner shipping conference, made prior to the coming into force of provision transferring theACT’s
inquiry role to the ACCC, remain valid until the inquiry is completed.
Items 178 and 179 (Review of decisions of Commission and
Minister)
These are transitional provisions to make clear that the
provisions covering the review of decisions by the ACCC and the Minister apply
after the new Divisions 14A and 14B come into force, that is 28 days after Royal
Assent.
Part 3 (Schedule 1)
Item 180 (Transitional – pre-commencement inwards liner cargo
shipping services)
This is a transitional provision relating to Part 2 of
Schedule 1, and makes clear that the items to be repealed under items 155 to 164
do not remove the exemptions applying in respect of voyages by ships providing
an inwards liner cargo shipping service, that are only partly completed at the
time the repeals come into effect. For such ships the repeals come into effect
once the voyage commenced prior to the repeals come into effect, has
ended.
[1]Liner Shipping Cargoes and Conferences: Review of Part X of the Trade Practices Act, Report of the Part X Review Panel, AGPS Canberra 1993
[2] Subsection
10.44(1) includes powers for the Minister to deregister a conference agreement
and thus remove the Part X exemptions from the competition rules of the Trade
Practices Act 1974. Guidance on interpreting the term ‘exceptional
circumstances’ is provided in the Second Reading Speech and under item 102
above.