4 August 2008
JSA Comments on the Public Consultation Paperfor Hong Kong’s Competition Law
The Japanese Shipowners’ Association (“JSA”) appreciates this opportunity tosubmit its comments on the Public Consultation Paper for a Competition Law
published by the Hong Kong Commerce and Economic Development Bureau.
The JSA supports the comments separately submitted by the International
Chamber of Shipping, the Hong Kong Shipowners’ Association and the HongKong Liner Shipping Association, which includes several JSA member
companies. In addition to those comments, the JSA respectfully outlines below
its basic position on antitrust immunity for carrier agreements (hereafter referredto as the “carrier agreement system”).
The JSA is a nation-wide shipowners’ association consisting of 108 Japanese
shipping companies. A large number of the JSA’s member shipping companies
are engaged in the transportation of cargo between Hong Kong and many othercountries throughout the world, including Japan. Many of these companies areparties to vessel sharing agreements, conferences, and other cooperative
arrangements amongst shipping lines. These lines have often made significant
investments and structured their business operations based on the ability toparticipate in these types of cooperative arrangements. The JSA has asubstantial interest in Hong Kong’s Competition Law as the members of the JSA
will be directly affected by its application.
(1) Certain long-standing and widely accepted international practices in theinternational shipping industry should be granted a block exemption.
Carrier agreements with respect to rates, charges, and operational mattershave historic origins dating back to the 1870s, and still play a vital role in the
shipping industry today. Even if an agreement or activity would arguably beprohibited by a general competition law or regulation, the JSA believes thatthese agreements should be exempted as being in the public interest of Hong
Kong and as a matter of international comity, particularly with other key Asian
trading partners. Cooperative agreements amongst carriers are a long-standingpractice and are widely accepted in international trade. They have been
permitted to operate under Hong Kong’s laws for over a century and have
served the Hong Kong economy well. It would neither be sensible nor fair forthis practice to be abruptly declared unlawful.
There are many cases in which shipping lines have made very large
investments of capital in facilities, vessels and equipment in reliance on thecontinuation of a long-standing regulatory framework. In addition, theircustomers, many of whom would be involved in international trade, may also
have managed their business operations in reliance on the continued existenceof these practices.
The great majority of countries that have studied this issue have all concluded
that the carrier agreement system is necessary and beneficial to theinternational trading system and national economies. Amongst these countries
are Singapore, the United States, Canada, Australia, South Korea, Japan andothers. Furthermore, the Chinese Government has clearly stated in recent
official meetings with foreign governments that the regulations of the People's
Republic of China on International Maritime Transportation, which recognise
and authorise carrier cooperative agreements in China, would remain in place
after the Chinese Anti-Monopoly Law went into effect on 1 August 2008.
Equity and international comity, therefore, require that such practices should bepresumed to warrant full block exemption status under the new law unless it can
be clearly and affirmatively shown that they have not facilitated benefits andefficiencies for the Hong Kong economy, and that they unduly and unreasonably
impair competition and consumers’ benefits.
The JSA believes that this common sense approach would avoid disruptions
that could be harmful to the economy of Hong Kong. It would also be consistent
with Hong Kong’s national interests since it would foster international comity by
avoiding conflicts of activities that are authorised under the laws of most ofHong Kong’s major trading partners, such as the US, Canada, Japan,
Singapore and Australia.
(2) JSA’s fundamental stance on antitrust immunity for the carrier agreementsystem can be summarised as follows.
The current liner shipping business established under the carrier agreement
system contributes to stable freight rates and, as a result, enables member
shipping companies of carrier agreements such as conferences, discussionagreements and consortia to save significant costs in providing reliable liner
shipping services and improving their service quality and the level of efficiency.
This has particularly been the case over the past 10 years in which the liner
shipping industry has had to invest huge sums years in advance to meet
unknown growth levels in containerized cargoes that exceeded general GDP
growth by almost 300%. The carrier agreement system has thus been essential
for the whole maritime trading industry, including carriers as well as shippers
who benefit from high-quality shipping services. In contrast, ending the existing
system would not only risk inconsistency with many other Asian economies, but
it would also risk destructive competition among carriers, which will set freightrates far below costs and seriously weaken the ability of carriers to invest in
ships and other trade infrastructures required to meet the growing demands for
ocean transportation. Such competition may also result strong pressure toconsolidate and an oligopolistic situation in ocean shipping that would bringnegative consequences for the whole trading industry, such as fewer service
options, reduced efficiency and lower quality services.
(3) Conclusion
For the reasons set forth in above comments, the JSA sincerely requests that
the Government of Hong Kong drafts the Competition Law and its detailed
enforcement regulations which grant a block exemption for all types of carrier
agreements, such as conferences, voluntary discussion agreements andconsortia.
------------------------------------------