A block exemption exempts a category of agreements from the section 34 prohibition on anti-competitive agreements, decisions and practices. The Minister for Trade and Industry may make such an order, on CCCS’s recommendation, if a particular category of agreements contributes to improving production or distribution, or promoting technical or economic progress, without imposing undue restrictions, or possibly eliminating competition in respect of a substantial part of the goods or services in question.
There is currently one block exemption order in force, namely the Block Exemption Order for Liner Shipping Agreements, which is valid until 31 December 2020.
Block Exemption Order
Section 36 of the Competition Act (Cap. 50B) empowers the Minister for Trade and Industry (the “Minister”) to make an order, following the recommendation of CCCS, to exempt certain categories of agreements from the section 34 prohibition. This is known as a block exemption, which is granted on the basis that a category of agreements fulfil the criteria set out under section 41 of the Act. Specifically, the criteria are that the agreements contribute to:
(a) improving production or distribution; or
(b) promoting technical or economic progress;
but do not:
(i) impose on the undertakings concerned restrictions which are not indispensable to the attainment of such objectives; or
(ii) afford the undertakings concerned the possibility of eliminating competition in respect of a substantial part of the goods or services in question.
Competition (Block Exemption for Liner Shipping Agreements) Order
On 14 July 2006, the Minister issued the Competition (Block Exemption for Liner Shipping Agreements) Order (“Block Exemption Order”), which exempted a category of liner shipping agreements from the section 34 prohibition of the Act until 31 December 2010. The Minister subsequently extended the Block Exemption Order for an additional five years until 31 December 2015.
Prior to the expiry of the Block Exemption Order on 31 December 2015, CCCS reviewed the Block Exemption Order, taking into consideration the findings of the CCCS-commissioned consultancy study, which was based on both quantitative and qualitative information provided by industry stakeholders, feedback from CCCS’s own consultation with key industry stakeholders, industry developments, and regulatory developments overseas. A public consultation was conducted on CCCS’s proposed recommendation, and CCCS considered these views carefully before making a recommendation to the Minister for a five-year extension of the Block Exemption Order until 31 December 2020. (Click here for CCCS’s response to the public consultation and here for the media release issued by the Ministry of Trade and Industry).
Please refer to the Competition (Block Exemption for Liner Shipping Agreements) (Amendment) Order 2015 and the Block Exemption Order, which are to be read together with the accompanying explanatory note for more information.
Under paragraph 5(2)(b) of the Block Exemption Order, parties to liner shipping agreements with an aggregate market share of above 50% are required to file their agreements and any variation or amendment thereto with CCCS, in addition to the fulfilment of other conditions and obligations in the Block Exemption Order, to qualify for the block exemption from the section 34 prohibition.
Parties who are not sure if their agreements fall within the Block Exemption Order may wish to seek legal advice or apply to CCCS for a Notification for Guidance or Decision. Parties to agreements that do not fall within the Block Exemption Order and who are uncertain as to the status of their agreements may also do the same.