Chairman Announcement

Being the Chairman of the Executive Committee of the Association, I feel obliged to draw our Members’ awareness as to the major changes in obligations and prohibitions under the current regime of competition laws in the context of the shipping industry.

By way of reminder, the European Commission initiated a review on the maritime transport services market in 2005, which, inter alia, led to a public consultation on the tramp shipping market in 2006-2007. At the same time in 2006, the relevant authority repealed the exemption from the EU competition rules for liner shipping conferences. As a result, EU competition rules now apply fully to the maritime sector and the EU Commission has full powers to investigate, prohibit and impose fines in relation to violation of the rules. Following these changes, the Commission of the European Communities has in July 2008 issued the “Guidelines on the application of Articles 81 of the EC Treaty to maritime transport services” (“the Guideline”) with a view to providing basic assistance to the practitioners on the understanding of the law and the pitfalls that the practitioners have to pay attention to. As from October 2008, liner companies will have to assess themselves whether or not their business practices comply with competition rules.

It is against the above background that this Executive Committee would like to make the following Statement of Policy in order to ensure that the activities of the Association (which include the holding of Executive Committee Meetings (ECM), Annual General Meetings (AGM) and ad-hoc meetings (either in person or via electronic means) of various sub-committees) will be conducted in strict compliance with all applicable competition laws in relevant jurisdictions. I also like to make use of this Statement of Policy to draw our Members’ attention to some of the business activities that are strictly prohibited under the current competition laws.

Statement of Policy

The purpose of ECM, AGM and sub-committee meetings is mainly to provide opportunities to representatives of our Members to meet and discuss issues of common concern and to allow the Association to take a leadership role as to the practices and policy to be observed by practitioners in the cargo forwarding and logistics industry in Hong Kong.

It is the intent of the Association that all our activities (including the holdings of the above meetings) shall be conducted in strict compliance with all relevant competition laws of all relevant jurisdictions (including but not limited to the EU, US, Australia and the Mainland China) under the current regime.

Members are hereby called on to observe, in particular, the following principles and rules in carrying out the activities of the Association and their own business activities:

1. In principle, agreements – or even discussions – between competitors regarding pricing or customer-sharing are viewed as a hard-core restriction of competition. Hence, any agreement, arrangement or discussion which may come within the following categories, whether express or implied, are STRICTLY PROHIBITED:
a. Arrangement between Members as to prices, discounts, rebates, or any other aspect of pricing of services Members may provide in competition with one another;
b. Where Members are potential competitors, any arrangement between Members about:
(i) who members will supply their services to;
(ii) where or what services members will supply; or
(iii) the terms on which each Member will supply their services.
c. Any agreement between competitors that is intended or likely to harm non-participants in the market, such as by excluding a non-participant from any market; and
d. Any agreement that is intended or likely to lessen competition in the market overall As a remark, in most jurisdictions, one does not need to reach a formal agreement to breach the above rule. Any informal arrangement or understanding in relation

2. On practical side, the existence of unlawful collusive arrangements or practices as aforesaid may often be inferred by regulators from circumstances, including the exchange of information by competitors. Accordingly, discussions or disclosures of the following types of information between Members and/or potential competitors are also PROHIBITED, except where such information has otherwise been made public or appropriate legal counsel advises that such discussion are legally permissible:
a. Freight rates, charges or surcharges;
b. Individual costs;
c. An individual forwarder’s intentions to increase, reduce or reallocate capacity;
d. Information on individual customers; and
e. Any other competitively sensitive commercial or proprietary information.

3. Capacity management is another area of concern, which is of particular relevance to the shipping industry. Capacity management implies that carriers undertake not to use a proportion of space on their vessels for carriage of goods on a particular trade with reference to an anticipated excess of supply over demand. As a main rule all agreement between competitors limiting capacity or output are again regarded as hard-core restrictions of competition and hence PROHIBITED by the laws.

In view of the prohibitions as aforesaid, should it be apparent that at a meeting there is any attempt to disclose, discuss or make agreement of any kind about the pricing, amount or areas of our Members’ services, I am obligated to intervene and, if necessary, to break off the meeting.

The rules set out hereinabove are not meant to be exclusive or comprehensive. To best protect the companies’ interest, Members are strongly advised to look into the relevant rules and, in particulars, the Guideline in detail.

Thank You.