On 25 July 2014 the Competition Commission published a notice received from the Association of Shipping Lines (ASL) for exemption from certain provisions of the Competition Commission Act. ASL is a voluntary, multimember association whose members comprise various shipping liner companies, and is duly authorised to seek the exemption contemplated hereunder by and for the benefit of its members.
Members of the ASL are engaged in the provision of liner shipping services, which involves the transportation of goods on scheduled ships or vessels between ports via established sea routes, ie, ocean trade to and from one or more South African ports.
The subject matter of the application is a category of agreements and/or ancillary practices ASL members intend to conclude among them and implement in the maritime transport industry. The agreements and/or practices of members of ASL are hereby collectively referred to as the "Suite of Agreements". The Suite of Agreements involves the sale, exchange or pooling of spaces or slots between shipping lines on container ships bound to, around and from southern Africa or in certain instances, agreements between shipping lines and their customers. Some agreements which form part of the Suite of Agreements constitute what may be referred to as "consortia agreements" in that they make provision for joint services by two or more shipping lines to customers. Other agreements are purely vertical as they do not constitute the provision of joint services to customers.
In particular, the Suite of Agreements consist of the following four agreements: (i) The Slot Charter Agreement - this involves the sale by one shipping line (the vessel provider) of slot or/ capacity aboard one of its vessels on a particular route to another shipping liner (the charterer) or alternatively, to a third party in the habit of chartering capacity aboard vessels. These agreements are generally concluded in respect of specific routes for a specific period of time; (ii) The Slot Exchange Agreement - this is a two- or/ multiple-way slot charter agreement involving a bilateral (or multilateral) reciprocal exchange of capacity between carriers on respective routes serviced by these carriers. The rationale for entering into a slot exchange agreement is to ensure that each vessel travelling the particular route which is subject of the agreement is operating at optimum capacity. In addition, a slot exchange agreement allows shipping lines to service ports which they otherwise do not or are not able to service; (iii) Vessel Sharing Agreements (VSA) - this is an agreement between two or more shipping lines in terms of which such liner companies agree to provide certain of their vessels for joint use on specific routes - the "VSA Fleet"; and (iv) The Multi-Carrier Service Contracts - these are essentially joint negotiations between multiple shipping lines and a customer expressed in the form of a single contract to service the various needs of the customer where one shipping line would otherwise be unable (due to its inability to meet frequency or capacity requirements) or unwilling (owing to the commercial risks involved to provide the service) to meet the customers' needs.
In its application, ASL submits that the aforesaid agreements are generally concluded in respect of specific routes and for a specified period of time only. Furthermore, ASL asserts that while these agreements are subject to a horizontal relationship (ie, between shipping lines) they are concluded on a purely vertical willing- buyer/willing- seller basis. According to ASL, each party negotiates with its customers/suppliers on an entirely independent basis.
The Suite of Agreements is likely to raise competition concerns in terms of the Act. However, ASL submits that the agreements are required to maintain or promote exports in South Africa. ASL considers the Suite of Agreements as vital in ensuring that the export of goods from South African shores to offshore destinations in the Southern African region is conducted efficiently and in a cost-effective manner to the benefit of local traders.
ASL is seeking this exemption for a period of five years, starting from the date of approval of the application by the Commission, should the Commission approve the application.
Comment is due by 22 August 2014.