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Hong Kong grants lines competition exemption for VSAs

Hong Kong grants lines competition exemption for VSAs
As expected, Hong Kong's Competition Commission on Tuesday issued a block exemption order (BEO) for vessel sharing agreements (VSAs) between liner shipping companies.

However the additional request by Hong Kong Liner Shipping Association (HKLSA) for a similar exemption for voluntary discussion agreements (VDAs) was not granted.

The commission said in a press release that under section 15 of the Competition Ordinance, the Competition (Block Exemption for Vessel Sharing Agreements) Order 2017 has been issued.

HKLSA had submitted an application for the BEO to the commission in December 2015. Giving its reasons, the commission said the order was issued "in light of its assessment of the economic efficiencies generated by VSAs".
  
The order further stipulated that certain conditions, including, that the parties to the VSA do not collectively exceed a market share limit of 40%; the VSA does not authorise or require shipping lines to engage in cartel conduct; and; shipping lines are free to withdraw from the VSA without incurring a penalty on giving a reasonable period of notice, must be met.
  
The BEO is valid for five years, with a review due in four years from the commencement date, or at any time it considers appropriate. The commission added that it decided not to issue a BEO for VDAs or the revised VDA scope which was proposed by the HKLSA because it was not demonstrated that the relevant VDA activities meet the terms of efficiency exclusion.  

The commission has, however, provided certain guidance as to which VDA activities may give rise to competition concerns, and which would be unlikely to contravene the ordinance.