The Australian Competition and Consumer Commission has found that there are not sufficient grounds to recommend the revocation of an agreement which exempts a group of cargo shipping lines from some of the anti-competitive provisions of the Trade Practices Act 1974.
"The specialised treatment of the international cargo shipping industry stands in stark contrast to the rules that apply to other industries", ACCC Chairman, Mr Graeme Samuel, said today.
"In order to gain protection from the prohibitions on anti-competitive agreements, businesses in other industries are required to notify the ACCC in advance and make the case that there is either no detriment from the agreement or that some public benefit mitigates that detriment.
"In the case of the international cargo shipping industry, blanket exemptions are granted which can only be later overturned if the ACCC can establish the case that anti-competitive detriment exceeds any benefit. The evidence required to establish such a case represents a remarkably high threshold".
The ACCC today issued a report detailing its reasons for recommending that the Federal Minister for Transport and Regional Services not disallow the Asia-Australia Discussion Agreement's (AADA) power to discuss and agree on freight rates for cargo being shipped from North East Asia to Australia.
The ACCC's decision follows a public investigation that began in October 2003, initiated after complaints from importers that prices for shipping cargo from North East Asia (in particular, China, Hong Kong and Taiwan) were increasing rapidly and service was deteriorating.
In response to the ACCC's inquiries, the AADA argued that were the AADA agreement not in existence, other registered anti-competitive agreements would be adapted to cover the North East Asia-Australia trade.
"This highlights both the pervasiveness of these anti-competitive agreements and the permissiveness of the Part X regime", Mr Samuel said.
"In beginning the investigation, the ACCC was concerned about the number of complaints it was receiving, the particularly high market share of the AADA members, the steepness of the price increases, the lack of advance notice of the price
increases and the apparent lack of additional shipping capacity proposed for the booming trade.
"Although the rationale for such an exemption is that public benefits in terms of improved scheduling and certainty of services may outweigh the anti-competitive detriment, the ACCC's investigation found that no significant public benefit associated with the AADA was substantiated. Indeed, importer associations reported that during the latter part of 2003, the AADA worked entirely to the benefit of its members rather than to the public. This calls into question whether Part X serves the interests of Australian importers and exporters".
The ACCC's investigation revealed that the trade between North East Asia and Australia was subject to a number of influences. There has been a global demand for manufactured goods from North East Asia. Australia reflects this demand boom, with the number of full containers imported into Australia's five major port increasing by over 25 per cent during 2003. Additionally, the demand for vessels to supply the North East Asian trades exceeded their availability, contributing to a delay in additional vessels being committed to the North East Asia-Australia trade.
However, the ACCC also concluded that it is likely that the AADA agreement affected the willingness of its members to offer additional shipping capacity to the trade. To this end the ACCC notes that it was new entrants to the trade, rather than AADA members, who were first to commit to additional services.
"In its investigation, the ACCC could not clearly separate these broader market effects from the impact of the anti-competitive agreement comprised by the AADA. That is, the price increases and the delay in introducing additional capacity cannot be categorically attributed to the actions of the AADA members. As such, the ACCC is unable to press for the deregistration of the AADA", Mr Samuel said.