Current status: OPEN
Open on September 10, 2024 and will be closed on November 15, 2024.
We are reviewing how we regulate cooperative agreements between ocean carriers that transport marine cargo.
Currently, the Shipping Conferences Exemption Act exempts “conference agreements” between ocean carriers from the Competition Act. Due to changes in the global marine shipping industry, shipping conferences no longer operate along major Canadian trade routes. However, some ocean carriers are part of other cooperative agreements called “shipping alliances” that are subject to the Competition Act.
Background
Marine shipping accounts for about 20% of Canadian imports and exports by dollar value. It generates about $30 million in economic impact for the Canadian economy. It is important that marine shipping is competitive and fair to support the supply chains Canadians rely on for both imports and exports.
Because Canada is not a major ship-owning country, most vessels involved in international trade are foreign-owned and foreign-flagged. In the past, global marine shipping was dominated by “shipping conferences.” These were agreements between shipowners that set freight rates and allotted each member company a certain freight volume.
In line with the laws of our major trading partners, Canada passed the Shipping Conferences Exemption Act. This act exempts these conference agreements from the Competition Act, under the assumption they create market efficiencies that benefit both shippers and carriers.
The Shipping Conferences Exemption Act sets standards for conference agreements and requires that they are filed with the Canadian Transportation Agency. Any person can file a complaint if they believe that a shipping conference has unreasonably reduced the availability of services or unfairly increased prices. Ocean carriers that are found in violation of the Act can be fined.
By the 2000s, changes in the global maritime shipping industry led some of Canada’s trading partners to remove exemptions for shipping conferences from their competition law. Ocean carriers responded by making new cooperative agreements called “shipping alliances.”
Shipping alliances allow ocean carriers to coordinate their services. This improves efficiency and offers better freight rates, more routes and better transit times. They are usually limited to shipping containerized cargo, though the same companies involved in shipping alliances also often ship bulk cargo outside of their alliance agreements. Unlike shipping conferences, shipping alliances do not set freight rates, capacity limits, or allot market share.
Shipping alliances currently carry about 80% of containerized trade globally. They mostly cover east-to-west shipping routes between North America, Europe and Asia. Ocean carriers continue to independently operate north-south routes, for example between Canada and South America.
Recent developments
The rapid rise in freight rates and capacity issues during the COVID-19 pandemic raised concerns about competition in Canadian marine shipping. Freight rates continue to fluctuate due to both consumer demand and the impact of geopolitical events and climate change on shipping routes.
Many Canadian shippers are small to medium-sized enterprises. They have raised concerns about their ability to negotiate favourable rates and terms with ocean carriers, and the health of competition in the industry.
Canada’s trading partners have continued to move away from exemptions to competition law for cooperative agreements between ocean carriers. This year, both the European Union and the United Kingdom did not renew exemptions to competition law for shipping alliances.
In the United States, cooperative agreements between ocean carriers are subject to federal competition law. The 2022 Ocean Shipping Reform Act strengthened the Federal Maritime Commission’s ability to review and block agreements if they have a negative impact on competition.
Domestically, amendments to the Competition Act in June 2022, December 2023 and June 2024 will have an impact on cooperative agreements in all sectors, including marine shipping. This also includes changes that expand the types of agreements and behaviours that may be considered anti-competitive to include past collaborations and those that would have benefited from the now-repealed “efficiencies exception.” Private parties will have wider access to the Competition Tribunal. This allows more types of complaints to be heard, including complaints about collaborative agreements.
Amendments also give the Competition Bureau more power to conduct market studies and gather evidence; and eased the test for abuse of dominance. Fines and penalties for anti-competitive behaviour are increased. Persons who face retaliation for cooperating with Competition Act investigations can now seek redress.
Request for input
We’re looking at ways to modernize how we regulate competition between ocean carriers. We want any legislative amendments to contribute to healthy competition in the maritime transportation sector and provide Canadian shippers continued access to maritime transportation for their cargo under fair terms.
We’re seeking specific feedback on the use of cooperative agreements in the maritime transportation industry. Please submit your comments to marineliability-responsabilitemaritime@tc.gc.ca by November 15, 2024.
- What practical effects would repealing the Shipping Conferences Exemption Act have on cooperative agreements in the marine shipping industry as it currently operates in Canada?
- Shipping alliances, vessel sharing arrangements and other cooperative agreements currently used in the marine shipping industry fall under the Competition Act. Are the existing mechanisms to make complaints or raise concerns about these agreements adequate?