Proposal for a Council Regulation repealing Regulation (EEC) No 4056/86 laying down detailed rules for the application of Articles 85 and 86 to maritime transport, and amending Regulation (EC) No 1/2003 as regards the extension of its scope to include cabotage and international tramp services {SEC(2005) 1641}
Date: 2005-12-14
Institutions: European Commission
Subjects: competition law, economic concentration, maritime cabotage, maritime transport, merger control

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 14.12.2005 
COM(2005) 651 final 

2005/0264 (CNS) 

Proposal for a 

COUNCIL REGULATION 

repealing Regulation (EEC) No 4056/86 laying down detailed rules for the application of 
Articles 85 and 86 to maritime transport, and amending Regulation (EC) No 1/2003 as 
regards the extension of its scope to include cabotage and international tramp services  

(presented by the Commission) 
{SEC(2005) 1641 } 

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EXPLANATORY MEMORANDUM 

1. 

GENERAL 

Maritime  transport  services  are  key  to  the  development  of  the  EU  economy.  It  is 
paramount that the rules applying to the sector reflect today’s market conditions. In 
keeping with the Lisbon agenda, existing impediments for EU business to compete, 
innovate and grow should be removed. Legislation needs to be simplified and to be 
cost effective. In addition, the Commission is presently consulting widely on a new 
comprehensive  maritime  policy  aimed  at  developing  a  thriving  maritime  economy. 
This proposal accompanies those goals.  

1.1 

Council Regulation 4056/86 

1. 

2. 

3. 

Regulation  (EEC)  No  4056/86  lays  down  detailed  rules  for  the  application  of 
competition rules (Articles 81 and 82 of the Treaty) to maritime transport services. 

Originally  the  Regulation  had  two  functions. It contained procedural provisions for 
the  enforcement  of  the  EC  competition  rules  in  the  maritime  transport  sector.  This 
function has become redundant after 1 May 2004, when maritime transport became 
subject to the general competition enforcement rules of Council Regulation (EC) No 
1/2003.  Secondly,  it  lays  down  certain  specific  substantive  competition  provisions 
for the maritime sector and notably a block exemption for liner shipping conferences 
allowing them under certain conditions to fix prices and regulate capacity. 

Scheduled  services  in  container  transport  account  for  approximately  40%  of  the 
EU25 external trade by sea in value terms. This means that 18% of imports and 21% 
of EU25 exports are affected by carriers’ ability to fix prices jointly under the liner 
conference block exemption.  

1.2. 

The review of Regulation 4056/86  

4. 

5. 

The  liner  shipping  market  has  changed  considerably  since  Regulation  4056/86  was 
adopted. The continuing trend towards containerisation has led to an increase in the 
number  and  size  of  fully-cellular  container  vessels  and  to  an  emphasis  on  global 
route networks. This has contributed to the popularity of consortia and alliances as a 
means of sharing costs. The growth in importance of these operational arrangements 
has  been  accompanied  by  a  decline  in  the  significance  of  conferences.  The  latter 
trend  has  been  particularly  marked  on  the  trades  between  the  EU  and  the  United 
States, largely as a consequence of pro-competitive Commission decisions applying 
Articles  81  and  82  EC  and  changes  in  US  legislation,  which  have  promoted 
individual service contracts at the expense of carriage under the conference tariff. 

(shippers  and 

Transport  users 
forwarders)  seek  customer-focused 
relationships  with  carriers,  reciprocal  performance  related  compensation  and 
integrated  logistic  solutions.  They  have  systematically  questioned  the  conference 
system which they consider does not deliver adequate, efficient and reliable services 
suited to their needs. They call for the abolition of conferences. 

freight 

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6. 

7. 

Other jurisdictions and international organisations have also questioned the benefits 
of maintaining the conference system. In April 2002 the OECD published a report1 
calling for member countries to remove antitrust exemption for common pricing and 
rate  discussions  but  to  retain  the  exemptions  from  other  operational  agreements 
between liner carriers. Australia has also been carrying a review of the sector and has 
recently reached similar conclusions2. 

Against this background the Commission launched a review of Regulation 4056/86 
to determine whether reliable scheduled maritime services could be achieved by less 
restrictive means than horizontal price fixing and capacity regulation. A Consultation 
Paper issued in March 2003 was followed by a public hearing in December 2003 and 
the  adoption  of  a  White  Paper  in  October  2004.  Numerous  submissions  were 
received from all stakeholders. The European Parliament3, the Economic and Social 
Committee4 and the Committee of the Regions5 issued opinions. Three meetings with 
Member  State  competition  and  transport  experts  were  held.  The  Commission 
contracted three studies from independent consultants to look into the issues arising 
from a repeal of the conference block exemption. All documents are published in DG 
COMP website6. 

1.3. 

Subject 

8. 

9. 

The  proposed  Regulation  aims  at  repealing  Regulation  4056/86  in  its  entirety  and 
notably  the  liner  conference  block  exemption,  (Articles  3  to  8,  13  and  26).  Certain 
provisions which are redundant are also repealed in line with the EC’s overall policy 
to reduce and simplify Community legislation (Articles 2 and 9).  

Finally,  it  amends  Council  Regulation  1/2003  to  bring  cabotage  and  tramp  vessel 
services under the scope of the common competition implementing rules. 

1.4. 

Legal basis 

10. 

The  legal  basis  for  the  proposed  Regulation  is  Article  83  of  the  Treaty.  The 
Commission’s initial proposal for Regulation 4056/86 was also made on the basis of 
Article 87 [now Article 83] of the Treaty. The Council considered that Article 87 was 
the appropriate legal basis for the Regulation, but added Article 84(2) [now Article 
80(2)] of the Treaty] since Article 9 of the Regulation dealt with possible conflicts of 
law  with  third  countries. The  Commission formally  reserved its position  and stated 
that Article 87 of the Treaty constituted the appropriate legal basis for the Regulation 
in its entirety, including Article 9.  

11. 

While it is normal practice to base a Community measure on the same legal basis as 
the  original,  there  are  good  grounds  to  deviate  from  this  practice  where  the  legal 
basis of the original measure can be considered incorrect. In the light of the case law 

1 
2 

3 
4 
5 
6 

DSTI/DOT (2002) 2, 16.4.2002 
Review  of  Part  X  of  the  Trade  Practices  Act  1974 :  International  Liner  Cargo  shipping,  Productivity 
Commission Inquiry report released by the Government on 23 February 2005  
Own initiative report of the Committee for Transport and Tourism, xxxxx? 11 October 2005  
TEN/208 – CESE 1650/2004 – 16 December 2004 
CdR 485/2004, 13 April 2004 
http://europa.eu.int/comm/competition/antitrust/legislation/maritime/ 

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of the Court, Article 84(2) of the Treaty is inoperative and redundant as a legal basis 
for Regulation 4056/86 because the aim and content of Regulation 4056/86 including 
Article  9  relate  to  competition  law.  The  proposal  for  a  regulation  repealing 
Regulation 4056/86 should therefore be based on Article 83 of the Treaty only. 

1.5. 

Cabotage and tramp services  

1.5.1.  General remarks 

12. 

13. 

Cabotage  and  international  tramp  vessel  services  are  currently  the  only  remaining 
sectors that are excluded from the Community competition implementing rules.7 The 
lack  of  effective  enforcement  powers  for  these  sectors  is  an  anomaly  from  a 
regulatory point of view.  

The  proposal  to  bring  these  services  under  the  common  competition  implementing 
rules  does  not  involve  a  substantive  change  for  the  industry  as  the  substantive 
competition rules, set out in Articles 81 and 82 of the Treaty, already apply.  

1.5.2.  Cabotage 

14. 

Regulation 4056/86 does not explain why cabotage is excluded from its scope. The 
only indirect reference is to be found in recital 6 which states that the Regulation’s 
objective is to avoid excessive regulation of the sector, implying that in a majority of 
cases cabotage services would not affect intra-Community trade. However, this does 
not justify why these services should from the outset be excluded from the scope of 
Regulation 1/2003.  

1.5.3.  Tramp 

15. 

16. 

Non-regular maritime transport services of bulk and break-bulk today cover a wide 
range  of  highly  diversified  services  of  significant  economic  importance  of  which 
most  have  a  clear  European  dimension.  The  fourth  recital  of  Regulation  4056/86 
suggests  that  the  exclusion  is  due  to  these  services  operating  on  a  free  and 
competitive  market.  This  however  is  presumed  to  be  the  case  for  all  de-regulated 
services,  without  it  being  deemed  necessary  to  exclude  such  services  from  the 
implementing regulations.  

Including  these  services  within  the  scope  of  the  implementing  Regulation  will 
increase  legal  certainty.  Under  Regulation  4056/86,  industry  as  well  as  the 
competition authorities have to devote considerable resources into assessing whether 
a  service  fulfils  all  of  the  five  criteria  set  out  in  Article  1(3)(a)  of  the  Regulation8 
before determining what action could be taken and by whom.  

7 
8 

Article 32 (a) and (b) of Regulation 1/2003.  
The transport of goods in bulk or in break-bulk in a vessel charted (wholly or partly) to one or more 
shippers  on  the  basis  of  a  voyage  or  a  time  charter  on  any  other  form  of  contract  for  non-regularly 
scheduled or non-advertised sailings where freight rates are freely negotiated case by case in accordance 
with the conditions of supply and demand 

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1.5.4.  Guidance to the tramp sector 

17. 

18. 

In  the  consultation  process  various  submissions  emphasised  the  need  to  provide 
guidance  to  the  tramp  sector  on  the  application  of  the  EC  competition  rules.  The 
Commission  stated  in  its  White  Paper  that  it  would  consider  issuing  some  form  of 
guidance in a manner that is to be determined. For that purpose the Commission is 
engaged in discussions with tramp operators so as to understand the issues at stake. 
The  Commission  is  committed  to  making  progress  in  these  discussions  so  as 
determine  whether,  and  the  extent  to  which,  these  agreements  constitute  a  novel 
question to which the Court’s jurisprudence and the Commission practice have yet to 
provide an answer.  

The  Commission  intends  to  issue  guidelines  explaining  how  the  competition  rules 
apply to the maritime sector in general, and to tramp services in particular. Although 
such  guidelines  can  be  formally  issued  only  after  the  Commission  has  been 
empowered  by  Regulation  1/2003,  the  Commission  is  currently  exploring  with 
industry whether it is necessary and appropriate to provide informal guidance before 
the changes to Regulation 1/2003 are made. 

1.6. 

Technical agreements  

19. 

20. 

21. 

9 

Article  2  of  Regulation  (EEC)  No  4056/86  states  that  the  prohibition  laid  down  in 
Article 81(1) of the Treaty does not apply to agreements whose sole object and effect 
is to achieve technical improvements and co-operation, on the grounds that they do 
not restrict competition. 

If an agreement restricts competition in the way provided by Article 81 (1), Article 2 
will  not  apply.  An  evaluation  of  each  single  technical  agreement  even  if  listed  in 
Article 2 is therefore necessary. Looking back on the application of this Article, this 
process has not been straightforward and has come at a cost to the industry. Carriers 
have often interpreted Article 2 broadly whilst the Commission and the Court of First 
instance consider that agreements that are not purely technical but also involve some 
form of commercial co-operation will fall within the scope of Article 81 (1)9 and thus 
fall outside the scope of Article 2. Litigation has ensued. 

The argument has been put forward that, in spite of its declaratory nature, Article 2 
should  be  maintained  because  it  might  provide  guidance  notably  in  the  context  of 
modernisation,  when  undertakings  have  to  assess  for  themselves  whether  their 
agreements  are  caught  by  Article  81(1)  of  the  Treaty.  The  case  law  of  the 
Commission and the Court is clear on the very limited scope of the provision which 
merely intends to confirm that agreements which are not restrictive of competition in 
the  first  place  do  not  fall  under  Article  81(1)  of  the  Treaty  and  as  such  are  not 

Commission  decisions  in  FEFC  (OJ  L  378,  31.12.1994,  p.  17  par  66)  and  FETTCSA  (OJ  L  268, 
20.10.2000,  p.  1  par  146-147)  with  regard  to  provision  for  technical  agreements  in  Article  3  of 
Regulation (EEC) No 1017/68 and Article 2(1) of Regulation (EEC) No 4056/86 respectively. For the 
Court  of  First  instance  see  Case  T-229/94  Deutsche  Bahn  AG  v  Commission  [1997]  ECR  II-1689, 
paragraph 37 in relation to the similar exception for technical agreements provided for in Article 3 of 
Regulation (EEC) No 1017/68. 

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prohibited10. Article 2 therefore does not add legal security. It should also be recalled 
that,  for  similar  reasons,  the  Council  in  2004  repealed  a  similar  provision  on 
technical agreements in the air transport sector.11 

1.7. 

The liner conference block exemption 

22. 

23. 

24. 

25. 

26. 

27. 

10 

11 
12 

13 

14 
15 

The  block  exemption  is  both  highly  generous  and  unique.  It  is  generous  because  it 
permits  liner  conferences  to  engage  in  activities  that  would  normally  constitute  a 
hard core restriction of competition (collective price fixing and capacity regulation) 
and which are unlikely to fulfil the conditions of Article 81 (3)12. It is unique because 
it  is  contained  in  a  Council  Regulation13which  was  adopted  even  though  the 
Commission had not gained any experience in granting individual exemptions in the 
sector. Furthermore, it contains no market share thresholds and is unlimited in time.  

The adoption of this exceptionally generous block exemption regulation can only be 
explained  in  its  historical  and  political  context.  It  was  the  result  of  the  discussions 
that  sought  to  reconcile  the  contradictory  requirements  of  the  UNCTAD  Code  of 
Conduct  for  Liner  Conferences14,  to  which  some  Member  States  had  acceded,  and 
the EEC Treaty. 

The industry has sought to apply the provisions of the block exemption broadly and 
extensively  so  as  to  cover  all  activities  the  carriers  deemed  useful  or  necessary  to 
adapt  to  changing  market  conditions.  This  has  lead  to  a  series  of  Commission 
decisions  and  subsequently  litigation  whereby  the  Court  confirmed  that  the  block 
exemption  –  despite  its  exceptional  nature  –cannot  derogate  from  the  Treaty 
competition provisions and must be given strict interpretation15. 

The  justification  for  the  liner  conference  block  exemption  in  essence  assumes  that 
conferences bring stability, assuring exporters of reliable services which can not be 
achieved by less restrictive means.  

After a thorough review process the Commission has concluded that liner shipping is 
not  unique  as  its  cost  structure  does  not  differ  substantially  from  that  of  other 
industries. There is therefore no evidence that the industry needs to be protected from 
competition.  

In present day market circumstances, the four cumulative conditions of Article 81(3) 
of  the  Treaty  needed  to  justify  an  exemption  for  liner  conference  price  fixing  and 
capacity regulation are not fulfilled.  

See  in  this  regard  also  the  Commission  Notice  on  horizontal  guidelines  (OJ  C  3  of  06.01.2001 p.  2), 
para 24. 
See Council Regulation No 411/2004 of 26.02.2004 (OJ L 68 of 06.03.2004, p. 1). 
See  Commission  notice  on  Guidelines  on  the  application  of  Article  81  (3)  of  the  Treaty,  OJ  C  101, 
27.4.2004, p.27, paragraph 46 
The Council usually empowers the Commission to adopt Block Exemption Regulations. Of the fifteen 
block  exemptions  currently  in  force  only  one  besides  Regulation  4056/86  is  adopted  by  the  Council 
(Regulation 1017/68). These are the only two block exemption Regulations that do not have an expiry 
date or review clause. 
http://www.admiraltylawguide.com/conven/liner1974.html 
Judgment  of  the  Court  of  First  Instance  of  28.2.2002  in  Case  T-395/94  Atlantic  Container  Line  and 
others v Commission [2002] ECR II-875, paragraph 146 

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28. 

29. 

30. 

31. 

32. 

To fulfil the first condition of Article 81(3) of the Treaty, it must be established that 
concrete  economic  benefits  flow  from  the  price  fixing  and  capacity  regulation  by 
conferences.  A  direct  causal  link  between  the  alleged  stability  and  the  provision  of 
reliable shipping services must be established. 

Carriers  consider  the  reliability  of  service  as  the  main  benefit  that  derives  from 
conferences.  However,  in  today’s  market,  conferences  are  not  able  to  enforce  the 
conference  tariff  and  do  not  manage  the  capacity  that  is  made  available  on  the 
market.  The  majority  of  cargo  is  carried  under  confidential  individual  agreements 
between  carriers  and  transport  users  rather  than  under  the  conference  tariff.  The 
proportion  of  contract  cargo  is  very  high  ranging  from  90%  and  above  in  the 
Transatlantic trade to 75% in the Europe to Australian trade. The same occurs in the 
Europe  to  Far  East  trades.  Thus,  under  the  current  market  circumstances,  price 
stability  and  the  reliability  of  services  are  brought  about  by  individual  service 
contracts.  

The second condition of Article 81(3) of the Treaty requires that, if liner conferences 
were to achieve economic benefits, a fair share of these benefits should be passed on 
to  consumers.  Yet  transport  users  (shippers  and  freight  forwarders)  fail  to  see  any 
benefits  of  price  fixing  by  conferences  and  call  for  their  abolition.  Although  the 
conference  tariff  is  no  longer  enforced  it  may  in  some  instances  act  as  a 
benchmarked  for  the  setting  of  individual  contracts.  Moreover  conferences  are  still 
setting surcharges and surcharges and the same level of charges or adjustment factors 
are often applied by non-conference members. These charges and surcharges account 
for on average 30% of the price of transport.  

Under the third condition of Article 81(3) of the Treaty, the test is basically whether 
there are less restrictive alternatives than conference price fixing which would assure 
reliable liner services to the benefit of consumers.  

Today,  scheduled  liner  services  are  provided  in  several  ways.  Independent  carriers 
operate  outside  conferences  on  all  main  trades  to  and  from  Europe.  Co-operation 
arrangements  between  liner  shipping  lines  not  involving  price  fixing,  such  as 
consortia and alliances16, have increased and have important shares of the market in 
all  major  trades.  Under  certain  conditions,  consortia  are  block  exempted  from  the 
prohibition  set  out  in  Article  81  of  the  Treaty  by  Commission  Regulation  (EC)  No 
823/200  of  19  April  200017  on  account  of  the  rationalisation  they  bring  to  the 
activities  of  member  companies  and  the  economies  of  scale  they  allow  in  the 
operation  of  vessels  and  port  facilities.  Moreover,  confidential  individual  service 
contracts between individual carriers and individual shippers account for the majority 
of  cargo  transported.  The  restrictions  permitted  under  Regulation  4056/86  (price 
fixing  and  capacity  regulation)  are  therefore  not  indispensable  for  the  provision  of 
reliable shipping services.  

16 

17 

Council  Regulation  (EEC)  No  479/92,  based  on  Article  87  [now  83]  of  the  Treaty  empowered  the 
Commission to apply Article 81(3) of the Treaty to liner shipping companies grouped in consortia and 
providing a joint service (OJ L 55, 22.9.1992, p.3) 
OJ  L  100,  20.4.2000,  p.24  as  amended  by  Commission  Regulation  (EC)  No  463/2004  of  12  March 
2004, OJ L 77, 13.3.2004 and by Commission Regulation 611/2005, OJ L 101, 21.4.2005, p. 10 

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33. 

34. 

Finally, the fourth condition of Article 81(3) of the Treaty requires that competition 
should  not  be  eliminated  on  a  substantial  part  of  the  market.  Conferences  operate 
alongside  consortia,  alliances  and  independent  operators.  It  would  appear  therefore 
that  the  fourth  condition  of  Article  81(3)  of  the  Treaty  may  be  fulfilled.  However, 
since the four conditions of Article 81(3) of the Treaty are cumulative and the first 
three  conditions  are  not  fulfilled  for  the  reasons  explained  above,  the  question 
whether or not the fourth condition is fulfilled could be left open.  

This said, carriers are likely to be members of a conference on a trade and outsiders 
in another. They may also be members of conferences and of consortia or alliances 
on the same market thus cumulating the benefits of the two block exemptions. In all 
cases, they exchange commercially sensitive information with their competitors that 
may  allow  them  to  adapt  their  conduct  on  the  market.  In  addition  for  charges  and 
surcharges representing on average 30% of the price of transport, there is clearly no 
competition on this part of the price. Given the increasing number of links between 
carriers,  determining  the  extent  to  which  a  particular  conference  is  subject  to 
effective competition is a case by case assessment.  

1.8. 

Conflict of laws 

35. 

36. 

37. 

38. 

39. 

Liner conferences have traditionally been tolerated worldwide. No jurisdiction has so 
far entirely removed their anti-trust immunity or exemption. If the EU would be the 
first to repeal the liner conference block exemption, this raises the question whether 
there is a risk of a conflict of international laws. 

The  Commission  does  not  believe  that  a  repeal  of  the  liner  conference  block 
exemption would  create  such  a  risk.  A conflict of  laws would arise  only  when  one 
jurisdiction requires something that another jurisdiction prohibits. The Commission 
is  not  aware  of  any  jurisdiction  that  imposes  such  an  obligation  on  liner  shipping 
operators.  

If the liner conference block exemption is repealed all carriers (both EU and non EU) 
that are presently part of conferences would no longer be allowed to fix prices and 
regulate  capacity  on  those  trades.  Given  the  definition  of  a  conference  this  implies 
that conferences would no longer operate on trade lanes to and from the Community. 
Nothing would impede these carriers to continue being part of conferences on other 
(non EU) trades. 

Article  9  of  Regulation  4056/86  provides  for  a  procedure  to  be  followed  if  the 
application of the Regulation results in a conflict with the laws and regulations of a 
third country. It is superfluous because the procedure foreseen therein is standard. If 
a conflict relating to competition law arises the Commission enters into consultation 
with the third country in question to lessen the impact of the divergence of approach 
and then takes all additional steps that may be necessary. 

Competition law is not applied in the same way in all jurisdictions. Divergences exist 
and the increasing importance of international cooperation between competition law 
enforcement  authorities  is  widely  recognised.  For  these  reasons,  the  Commission 
pursues a dual policy of, on the one hand, developing enhanced bilateral cooperation 
with  the  European  Community's  main  trading  partners  and,  on  the  other,  of 
examining  ways  to  expand  multilateral  co-operation  in  the  field  of  competition.  

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Therefore, also in light of the EU’s overall policy to reduce and simplify Community 
legislation, Article 9 should be repealed. 

1.9. 

Need for an alternative to the conference system 

40. 

41. 

42. 

43. 

Industry is divided on whether an alternative to the conference system is necessary, 
in the event of a repeal of the conference block exemption. Transport users consider 
that  existing  alternatives,  such  as  the  Consortia  Block  Exemption  are  sufficient. 
Carriers on the other hand have argued that there is a need for new block exemption.  

The European Liner Affairs Association (ELAA), a carrier organisation representing 
about  80%  of  world  capacity  has  proposed  that  the  conference  block  exemption 
should  be  replaced  with  an  exchange  of  information  system.  This  system  would 
potentially cover the whole liner shipping market and thus be broader in scope than 
the present conference block exemption.  

For  such  a  system  to  be  acceptable  it  must  respect  the  Court  case  law  and  the 
Commission  practice  on  exchanges  of  information  between  competitors.  Some 
elements  of  the  ELAA  proposal  appear  to  be  in  line  with  these  requirements. 
However,  others  are  problematic  notably  because  they  do  not  differ  in  effect  from 
what  conferences  do  today.  Accepting  the  proposal  as  such  would  remove  all  the 
pro-competitive effects of the abolition of the conference system. 

The Commission is committed to continuing the dialogue with industry to seek clear 
indications  and  substantiated  facts  about  what  it  needs  in  order  to  function 
effectively. Given that competition rules have never applied fully to the liner sector, 
the  Commission  will  issue  appropriate  guidelines  on  competition  in  the  maritime 
sector  so  as  to  help  smooth  the  transition  to  a  fully  competitive  regime.  The 
guidelines, which should be promulgated by end 2007, would treat issues such as, the 
independent data warehouse, the creation of a trade association and of trade fora, the 
publication of a price index and common formulae for charges and surcharges. The 
purpose of these guidelines is to explain, inter alia, how the competition rules apply 
to the liner sector in general, including timely and regular exchange and publication 
of  information  on  capacity  and  utilisation.  As  an  interim  step  in  the  preparation  of 
guidelines, DG COMP will publish an “issues paper” on liner shipping in September 
2006. 

1.10. 

Impact of the repeal of Regulation 4056/86 

1.10.1.  Economic assessment 

As it is shown in the annexed impact assessment, the repeal of the conference block 
exemption and that of Articles 2 and 9 is the best available option to lower transport 
costs  whilst  maintaining  reliability  of  services  on  all  trades;  enhancing  the 
competitiveness  of  European  industry,  in  particular  transport  users  without 
endangering  that  of  European  carriers  and  meeting  the  objectives  of  the  Lisbon 
agenda for the simplest and most cost effective legislative option. 

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1.10.2.  International implications 

44. 

45. 

46. 

47. 

48. 

2. 

49. 

Fourteen Member States have made use of the option set out in Council Regulation 
954/79 and have ratified the UNCTAD Code of Conduct for Liner conferences. The 
Code is not applied in practice and there have been no new accessions since the early 
1990s. 

If  the  liner  conference  block  exemption  is  abolished  the  application  of  the  Code 
becomes incompatible with the EC competition rules. This implies that the Member 
States  that  have  ratified  the  Code  of  Conduct  would  have  to  denounce  it.18  It  also 
implies  that,  for  the  sake  of  coherency,  the  Community  legislator  should  repeal 
Regulation 954/79. The Commission will be tabling a proposal to that end.  

Furthermore,  national  laws,  regulations  or  administrative  provisions  implementing 
Regulation  954/79  will  have  to  be  adjusted.  Two  Member  States  may  also  have  to 
revisit  their  international  agreements  with  third  countries  that  refer  to  the  Code  of 
Conduct or Regulation 4056/86. 

As a consequence, the date of application of those provisions of Regulation (EC) No 
4056/86 relating to the liner conference block exemption should be postponed for a 
period of two years. This concerns Articles 1(3) points (b) and (c), Articles 3 to 8 and 
26.  

The repeal of the liner conference block exemption would not have any implications 
for the international agreements entered into by the EU which contain a reference to 
Regulation 4056/86 and/or to the Code of Conduct. There are currently fourteen such 
agreements.19 Considering the way the provisions are phrased, the Commission holds 
the view that there is no need to modify these agreements if the Council decides to 
repeal Regulation 4056/86 because the texts do not impact on the ability of carriers 
to either party to the agreement to operate outside conferences. 

CONCLUSIONS 

The  Commission  accordingly  proposes  that  the  Council  adopts  the  proposed 
Regulation, repealing Regulation 4056/86 and amending Regulation 1/2003. 

50. 

The proposed Regulation will: 

–  repeal all remaining provisions of Regulation (EEC) No 4056/86;  

–  delete Article 32 of Regulation (EC) 1/2003, which excludes from its scope tramp 

services and cabotage. 

51. 

The proposed Regulation presented by the Commission with this memorandum falls 
within  the  field  covered  by  the  European  Economic  Area  and  is  accordingly  of 
relevance to it. 

18 

19 

Article 50 of the Code provides for denunciation to be notified in writing and to take effect at least one 
year later. 
See attachment 1. 

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2005/0264 (CNS) 

Proposal for a 

COUNCIL REGULATION 

repealing Regulation (EEC) No 4056/86 laying down detailed rules for the application of 
Articles 85 and 86 to maritime transport, and amending Regulation (EC) No 1/2003 as 
regards the extension of its scope to include cabotage and international tramp services  

(Text with EEA relevance) 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
83 thereof, 

Having regard to the proposal from the Commission1, 

Having regard to the opinion of the European Parliament2, 

Having regard to the opinion of the European Economic and Social Committee3, 

Having regard to the opinion of the Committee of the Regions4,  

Whereas: 

(1) 

Since 1986, the application of the rules on competition in the maritime transport sector 
has  been  subject  to  the  provisions  of  Council  Regulation  (EEC)  No  4056/86  of  22 
December 1986 laying down detailed rules for the application of Articles 85 and 86 of 
the  Treaty  to  maritime  transport5.  Regulation  (EEC)  No  4056/86  originally  had  two 
functions.  Firstly,  it  contained  procedural  provisions  for  the  enforcement  of  the 
Community competition rules in the maritime transport sector. Secondly, it laid down 
certain specific substantive competition provisions for the maritime sector and notably 
a  block  exemption  for  liner  shipping  conferences,  allowing  them  to  fix  prices  and 
regulate  capacity  under  certain  conditions,  the  exclusion  of  purely  technical 
agreements  from  the  application  of  Article  81(1)  of  the  Treaty  and  a  procedure  for 
dealing  with  conflicts  of  international  law.  It  did  not  apply  to  maritime  transport 
services between ports in one and the same Member State (cabotage) and international 
tramp vessel services. 

1 
2 
3 
4 
5 

OJ C, , p. . 
OJ C, , p. . 
OJ C, , p. . 
OJ C, , p. . 
OJ L 378, 31.12.1986, p. 4. Regulation as last amended by the 2003 Act of Accession. 

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(2) 

(3) 

(4) 

(5) 

(6) 

Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of 
the  rules  on  competition  laid  down  in  Articles  81  and  82  of  the  Treaty6  amended 
Regulation  (EEC)  No  4056/86  to  bring  maritime  transport  under  the  common 
competition enforcement rules applicable to all sectors with effect from 1 May 2004, 
with the exception of cabotage and international tramp vessel services. However, the 
specific substantive competition provisions relating to the maritime sector continue to 
fall within the scope of Regulation (EEC) No 4056/86.  

The liner shipping conference block exemption provided for in Regulation (EEC) No 
4056/86  exempts  from  the  prohibition  of  Article  81(1)  of  the  Treaty  agreements, 
decisions  and  concerted  practices  of  all  or part  of  the  members  of  one  or  more  liner 
conferences which fulfil certain conditions. The justification for the block exemption 
in  essence  assumes  that  conferences  bring  stability,  assuring  exporters  of  reliable 
services  which  cannot  be  achieved  by  less  restrictive  means.  However,  a  thorough 
review  of  the  industry  carried  out  by  the  Commission  has  demonstrated  that  liner 
shipping  is  not  unique  as  its  cost  structure  does  not  differ  substantially  from  that  of 
other industries. There is therefore no evidence that the industry needs to be protected 
from competition. 

The  first  condition  for  exemption  under  Article  81(3)  requires  that  the  restrictive 
agreement  contributes  to  improving  the  production  or  distribution  of  goods  or  to 
promoting  technical  or  economic  progress.  As  regards  the  efficiencies  generated  by 
conferences,  liner  conferences  are  no  longer  able  to  enforce  the  conference  tariff 
although they still manage to set charges and surcharges which are a part of the price 
of transport. There is also no evidence that the conference system leads to more stable 
freight  rates  or  more  reliable  shipping  services  than  would  be  the  case  in  a  fully 
competitive  market.  Conference  members  increasingly  offer  their  services  via 
individual  service  agreements  entered  into  with  individual  exporters.  In  addition 
conferences  do  not  manage  the  carrying  capacity  that  is  available  as  this  is  an 
individual  decision  taken  by  each  carrier.  Under  the  current  market  circumstances 
price  stability  and  reliability  of  services  are  brought  about  by  individual  service 
agreements. The alleged causal link between the restrictions (price fixing and supply 
regulation)  and  the  claimed  efficiencies  (reliable  services)  therefore  appears  too 
tenuous to meet the first condition of Article 81(3).  

The  second  condition  for  exemption  is  that  consumers  must  be  compensated  for  the 
negative effects resulting from the restrictions of competition. In the case of hard core 
restrictions such as horizontal price fixing which occur when  the  conference  tariff is 
set and charges and surcharges are jointly fixed, the negative effects are very serious. 
However no clearly positive effects have been identified. Transport users consider that 
conferences  operate  for  the  benefit  of  the  least  efficient  members  and  call  for  their 
abolishment. Conferences today do not fulfil the second condition of Article 81 (3). 

The  third  condition  for  exemption  is  that  the  conduct  must  not  impose  on  the 
undertakings  concerned  restrictions  which  are  not  indispensable  to  the  attainment  of 
its objectives. Consortia are co-operative agreements between liner shipping lines that 
do  not  involve  price  fixing  and  are  therefore  less  restrictive  than  conferences. 
Transport  users  consider  them  to  provide  adequate,  reliable  and  efficient  scheduled 

6 

OJ L 1, 4.1.2003, p.1. Regulation as amended by Regulation (EC) No 411/2004 (OJ L 68, 6.3.2004, p.1. 

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maritime services. In addition the use of individual service agreements has increased 
significantly in recent years. By definition, such individual service agreements are not 
restrictive of competition and provide benefits to exporters as they make it possible to 
tailor  special  services.  Furthermore,  because  the  price  is  established  in  advance  and 
does  not  fluctuate  for  a  predetermined  period  (usually  up  to  one  year),  service 
contracts can contribute to price stability. It has therefore not been established that the 
restrictions of competition permitted under Regulation (EEC) No 4056/86 (price fixing 
and  capacity  regulation)  are  indispensable  for  the  provision  of  reliable  shipping 
services to transport users as these can be achieved by less restrictive means. The third 
condition of Article 81(3) is therefore not satisfied  

Finally,  the  fourth  condition  of  Article  81(3)  requires  that  the  conference  should 
remain  subject  to  effective  competitive  constraints.  In  current  market  circumstances 
conferences are present in nearly all major trade lanes and they compete with carriers 
grouped  in  consortia  and  with  independent  lines.  Whilst  there  may  be  price 
competition on the ocean freight rate due to the weakening of the conference system 
there  is  hardly  any  price  competition  with  respect  to  the  surcharges  and  ancillary 
charges. These are set by the conference and the same level of charges is often applied 
by  non-conference  carriers.  In  addition,  carriers  participate  in  conferences  and 
consortia  on  the  same  trade,  exchanging  commercially  sensitive  information  and 
cumulating the benefits of the conference (price fixing and capacity regulation) and of 
the  consortia  (operational  co-operation  for  the  provision  of  a  joint  service)  block 
exemptions. Given the increasing number of links between carriers in the same trade, 
determining  the  extent  to  which  conferences  are  subject  to  effective  internal  and 
external  competition  is  a  very  complex  exercise  and  one  that  can  only  be  done  on  a 
case by case basis.  

Liner  shipping  conferences  therefore  no  longer  fulfil  the  four  cumulative  conditions 
for exemption under Article 81 (3) of the Treaty and the block exemption in respect of 
such conferences should therefore be abolished.  

The exclusion from the prohibition of Article 81(1) of the Treaty of purely technical 
agreements  and  the  procedure  for  dealing  with  conflicts  of  law  which  may  arise  are 
also redundant. Those provisions should therefore also be deleted.  

(7) 

(8) 

(9) 

(10) 

In  the  light  of  the  above,  Regulation  (EEC)  No  4056/86  should  be  repealed  in  its 
entirety. 

(11)  Liner  conferences  are  tolerated  in  several  jurisdictions.  In  this,  as  in  other  sectors, 
competition law is not applied in the same way worldwide. In light of the global nature 
of  the  liner  shipping  industry,  the  Commission  will  take  all  relevant  initiatives  to 
advance  the  removal  of  the  price  fixing  exemption  for  liner  conferences  that  exist 
elsewhere  whilst  maintaining  the  exemption  for  operational  co-operation  between 
shipping lines grouped in consortia and alliances, in line with the recommendations of 
the OECD Secretariat in 2002. 

Cabotage  and  international  tramp  vessel  services  have  been  excluded  from  the  rules 
implementing  Articles  81  and  82  of  the  Treaty  originally  laid  down  in  Regulation 
(EEC)  No  4056/86  and  subsequently  in  Regulation  (EC)  No  1/2003.  They  are 
currently the only remaining sectors to be excluded from the Community competition 

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implementing rules. The lack of effective enforcement powers for those sectors is an 
anomaly from a regulatory point of view. 

(12)  The exclusion of tramp vessel services from Regulation (EC) No 1/2003 was based on 
the  fact  that  rates  for  these  services  are  freely  negotiated  on  a  case  by  case  basis  in 
accordance with supply and demand conditions. However, such market conditions are 
present  in  other  sectors  and  the  substantive  provisions  of  Articles  81  and  82  already 
apply  to  these  services.  No  convincing  reason  has  been  brought  forward  to  maintain 
the current exclusion of these services from the rules implementing Articles 81 and 82 
of  the  Treaty.  Similarly  although  cabotage  services  often  have  no  effect  on  intra-
Community trade, this does not mean that they should be excluded from the scope of 
Regulation (EC) No 1/2003 from the outset.  

(13)  As  the  mechanisms  enshrined  in  Regulation  (EC)  No  1/2003  are  appropriate  for 
applying  the  competition  rules  to  all  sectors,  the  scope  of  that  Regulation  should  be 
amended so as to include cabotage and tramp vessel services. 

(14)  Regulation (EC) No 1/2003 should therefore be amended accordingly. 

(15)  Since Member States may need to adjust their international commitments in the light 
of  the  abolition  of  the  conference  system,  the  provisions  of  Regulation  (EEC)  No 
4056/86 relating to the liner conference block exemption should continue to apply to 
conferences satisfying the requirements of Regulation (EEC) No 4056/86 on the date 
of entry into force of this Regulation for a transitional period, 

HAS ADOPTED THIS REGULATION: 

Regulation (EEC) No 4056/86 is repealed.  

Article 1 

However, Article 1 (3) (b) and (c), Articles 3 to 7, Article 8(2) and Article 26 of Regulation 
(EEC) No 4056/86 shall continue to apply in respect of liner shipping conferences satisfying 
the  requirements  of  Regulation  (EEC)  No  4056/86  on  the  date  of  entry  into  force  of  this 
Regulation for a transitional period of two years from that date. 

Article 32 of Regulation (EC) No 1/2003 is deleted. 

Article 2 

Article 3  

This Regulation shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union.  

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

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Done at Brussels, [DATE] 

For the Council 
The President 

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