Tribunal considers request to abrogate immunity for shipping conferences

Introduction
Investigation
Comment

Introduction

The National Economic Office of the Public Prosecutor (known by its Spanish acronym, FNE) recently filed a petition before the Tribunal for the Defence of Free Competition requesting that the latter propose to the president that Article 5 of the Merchant Navy Law be modified, annulling the exemption enjoyed by shipping conferences, pool agreements and consortiums that regulate and rationalise services from the Competition Act (Decree-Law 211/1973). The proposed amendment aims to harmonise the industry's regulations with the principles of free competition. The FNE also requested that Chile withdraw as a state from the denominated United Nations Convention on a Code of Conduct for Liner Conferences.

Role of FNE
The FNE is the national agency responsible for free competition. As such, it must defend and promote competition in every market and industry of the economy.

The Competition Act states that the FNE is a decentralised public service, with legal personality and its own assets, independent from any other entity or service and subject to supervision by the president, acting through the Ministry of the Economy, Development and Tourism.

The organisation is led by the national economic prosecutor, who is both the executive director and the legal and extrajudicial representative of the FNE.

Role of tribunal
The Tribunal for the Defence of Free Competition is a special and independent jurisdictional body, subject to the economic, corrective and directive superintendence of the Supreme Court. Its function is to prevent, correct and penalise any obstacles to free competition. It is headquartered in the city of Santiago and each of its members holds the title of minister. It works as a collegiate organism, composed of three barristers and two economists, similar to a court of appeals. It was created through Law 19,911/2003 and replaced the Antitrust Resolutory Commission and the preventive commissions (both central and regional).

The tribunal's procedure in this case is flexible, but is also subject to its discretionary faculties. In this respect, the tribunal usually appoints a reporter to provide it with a summary of the different submissions and positions. The interested parties that made submissions are normally free to submit additional antecedents until 10 days before the date of a public hearing fixed by the tribunal. After the hearing, the tribunal will proceed to draft its judgment and recommendations. In order to approve abrogation of the current immunity, the tribunal would suggest that the government draft a motion to change the law, which would need to be discussed before the Parliament in due course.

Investigation

The FNE commenced a confidential investigation in November 2009 (Role 1545-09), regarding possible anti-competitive practices in the shipping market related to maritime conferences. The FNE studied the current legal framework, in which the maritime conferences develop their activities, highlighting both Article 5 of the Merchant Navy Law and the above-mentioned UN convention. It also analysed the 2002 suggestions of the Organisation for Economic Cooperation and Development, of which Chile is a member, in order to bring to an end any advantage or sectorial exemption that might impede free competition among its member countries.

A public hearing before the tribunal took place on November 14 2012, with oral presentations made by the FNE, the Ministry of Transportation, the General Directorate of International Economic Relationships and several ocean carriers. The tribunal requested copies of all agreements held by the different parties for the past 10 years, which were submitted by mid-January 2013.

The tribunal is in the process of reviewing the materials provided by the different parties.

Comment

The FNE is not seeking the general prosecution of agreements that currently enjoy exemption, but rather that the authorities be granted the possibility of reviewing and analysing whether such agreements should be adjusted to facilitate free competition. It is likely that the potential abrogation of the system could be detrimental for Chilean international trade - particularly as, for the most part, Chile's trade partners have decided not to make substantive changes on this matter (as is the case for the United States and Japan).

The exemption system has succeeded in creating stability in the local shipping industry and provided economies of scale, particularly on routes that are small and far away from the principal clusters of consumers and producers. Therefore, rather than a unilateral decision to abrogate it, a more reasonable approach would be to review international trends and await future developments in the legal regimes of major trading partners.

For further information on this topic please contact Ricardo Rozas at Jorquiera & Rozas Abogados by telephone (+56 2 580 9300), fax (+56 2 580 9311) or email (rrozas@jjr.cl).