CCCS recommends 5-year renewal of the Block Exemption Order

The Competition (Block Exemption for Liner Shipping Agreements) Order (commonly referred to as the LSA BEO) is a regulatory framework in Singapore that provides certain exemptions from competition law for specific agreements within the liner shipping industry. The Competition and Consumer Commission of Singapore has suggested to the Deputy Prime Minister and Minister for Trade and Industry to renew the Competition as follows:

Retain the categories of liner shipping agreements (“LSAs”) which will benefit from the LSA BEO:

• Vessel sharing agreements (“VSAs”) for liner shipping services;

• Price discussion agreements (“PDAs”) for feeder services; and

Update the scope of the LSA BEO to reflect current industry practice. The order will cover co-operation among liners specifically for the transport of goods between ports only.

The recommendation follows CCCS’s assessment that these agreements generate net economic benefit (NEB) for Singapore.

Feedback from public consultation

CCCS received five responses through the public consultation exercise held from 27 May 2024 to 17 June 2024. The feedback received was generally supportive of the recommendation to renew the LSA BEO for five years.

The current LSA BEO covers co-operation among liners on liner shipping services, including inland carriage of goods (e.g., truck or rail haulage) as part of through transport. CCCS had earlier received feedback from freight forwarders on the possible unlevel playing field between the liners which have competition law immunity with respect to inland carriage, and the freight forwarders which do not.

Public feedback indicated no clear evidence of current or impending usage of LSAs involving the inland carriage of goods occurring as part of through transport.

CCCS’s recommendation

CCCS has carefully evaluated the current state and future of the liner shipping industry. Its recommendation considered market trends and developments in the liner shipping industry, international regulations, public feedback, and Singapore’s upcoming maritime developments, including decarbonisation and the new Tuas Port. CCCS assessed that the following LSAs will generate NEB for Singapore:

Impact of VSAs on liner shipping services

VSAs for liner shipping services improve the global connectivity of Singapore’s port and support its status as a transhipment hub. VSAs also enhance competition among liners by lowering entry barriers for smaller liners to provide services on trade routes and at frequencies that they would otherwise not be able to provide on their own due to lack of scale. VSAs also bring about environmental benefits by enabling liners to share, utilise and deploy larger vessels.

Relevance of PDAs for feeder services

PDAs for feeder services remain relevant to some feeders operating in Singapore. Being able to participate in such PDAs attracts feeders to base their headquarters and operations in Singapore, and to connect their services through the country. Feeders, in turn, attract and anchor main lines to Singapore, thus expanding Singapore’s shipping network to support its status as a transhipment hub. Anti-competitive effects arising from PDAs appear to be limited, as customers of feeders are likely to possess bargaining power.

Proposed duration for LSA BEO

On balance, CCCS assessed that a duration of five years would adequately balance the needs of the industry for legal certainty in view of Singapore’s upcoming maritime developments and allow CCCS to undertake timely assessment of the LSA BEO to respond to any change in the industry.

Recommendations for updating the LSA BEO scope

Further, CCCS recommends updating the scope of the LSA BEO to cover only co-operation among liners for transporting goods between ports to reflect the current industry practice. Should co-operation on inland carriage of goods become prevalent in the future and proves beneficial for Singapore, CCCS will consider appropriate regulatory measures. These measures would aim to facilitate co-operation while ensuring a level playing field for all relevant providers (including freight forwarders). To facilitate this transition, CCCS recommends a provision in the LSA BEO to allow any current LSAs involving inland carriage of goods to benefit from the LSA BEO for one year (i.e., 1 January to 31 December 2025).