Liner Conference System

A Liner Conference System (also called a "shipping conference") is an agreement within the shipping industry in relation to ocean liners. Typically, the agreement is between two or more shipping companies to provide scheduled cargo and/or passenger service on a particular trade route under uniform rates and common terms.[1]

Although a Liner Conference System allows shipowners to club together, enabling them to continue to operate a regular "liner service" and maintain requisite standards of service, there is a downside. Such agreements may establish protectionist organisations that can involve monopoly abuse and possible breach of competition law.[2] For instance, under European Community Law, article 101[3] of the Treaty of Rome (as amended) imposes a prima facie ban on anticompetitive "agreements between undertakings".[4] However, the Encyclopædia Britannica site[5] states that overall the advantages to the public of Liner Conferences outweigh their disadvantages.[6]

References

1. Lecture notes: The Liner Conference is an organisation whereby a number of shipowners offer their services on a given sea route on conditions agreed by the members. Conferences are oligopolistic* associations of shipping lines formed for the purpose of restricting competition between members and protecting them from outside competition. They achieve their object by controlling prices and limiting entry into the trade. The most important method employed to this aim is to establish a common tariff of freight rates and passenger fares. By limiting sailings and ports of call and by offering incentives (deferred rebate system and contract system) to loyal shippers, they provide a regularity of service to exporters that may not exist otherwise. Often when conferences perform special services, such as lifting unprofitable cargo or resorting to chartering to cover temporary shortages of tonnage, they pool the losses or profit on such operations. A shipping company usually belongs to several conferences. Members are left free to compete for traffic by the quality and efficiency of their service. Membership is international by character. Shippers frequently associate themselves into Councils to negotiate with Conferences on a footing of equal strength, as a countervailing power.
   • An oligopoly is a formal or loose association of companies that act together so as to exercise the powers of monopoly. Revenue in some cases is pooled, and shared according to some formula."
2. Thesis on Liner Conferences
3. Art.101 (1). The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which: (a) directly or indirectly fix purchase or selling prices or any other trading conditions; (b) limit or control production, markets, technical development, or investment; (c) share markets or sources of supply; (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. (2). Any agreements or decisions prohibited pursuant to this Article shall be automatically void.
4. An "undertaking" is EU-speak for a business, company or firm.
5. Encyclopaedia Britannica
6. "The shipping conference system has sometimes come under attack as tending to create a monopoly and to restrain competition against the public interest. It is, however, generally agreed that evidence is in favour of this system: it has been concluded that no realistically possible combination of shipping companies can force unreasonable rates and that shipping companies that provide regular sailings with good ships and maintain staffs and organizations in ports to handle and dispatch cargoes—irrespective of whether trade is good or bad—are entitled to some protection against the casual vessel that picks up an occasional cargo at cut rates."

Further reading

• 1974 Convention on a Code of Conduct for Liner Conferences