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Hong Kong grants block exemption to VSAs

Hong Kong grants block exemption to VSAs

Hong Kong’s Competition Commission has issued a five-year block exemption for vessel sharing agreements (VSAs) between shipping lines while refusing to authorise voluntary discussion agreements (VDAs).

The order is subject to certain conditions including that VSA members do not collectively exceed a market share of 40% and that the VSA does not authorise or require shipping lines to engage in cartel conduct.

Additionally, shipping lines must be free to withdraw from the VSA without incurring a penalty on giving a reasonable period of notice.

VSAs include consortia, slot exchange agreements, joint service agreements and alliances while VDAs are agreements where shipping lines discuss commercial matters relating to particular shipping routes.

Both VSAs and VDAs are permitted in the US and Canada while in the European Union (EU), only consortia agreements between carriers (equivalent to VSAs) benefit from a block exemption from the EU competition rules.

In Singapore, a block exemption order for liner shipping agreements (covering both VSAs and VDAs) has been in force since 2006.

In a statement, the Commission noted that “VSAs may enable individual carriers to offer their customers broader service coverage and higher service frequency than would be the case if they operated alone” .

” It is conceivable that VSAs would also contribute towards maintaining levels of transshipment traffic in Hong Kong,” it added.

The Commission has proposed to review the order four years from its start date although it is free to do this at any time of its choosing.

It is also granting a six month grace period for parties to any VSAs which do not benefit from the Order, and VDAs, so as to allow such parties to make any changes they may consider necessary to their commercial arrangements.

The Commission had received an application for a block exemption order in December 2015 by the Hong Kong Liner Shipping Association (HKLSA), which has 16 members including the likes of Maersk, CMA CGM and COSCO.