Regulation 4057/86: dumping of shipping services and the unfair pricing of shipping services

17.001 “Dumping” occurs when a product or service from one country is introduced on to another country’s market at less than the normal value of that product or service. This practice has serious consequences for the economy in which the goods or services are dumped because it undermines unfairly industry in that second economy. ¹ Dumping can be a temporary phenomenon but the consequences can be long lasting. The European Union (“EU”) has fallen victim to dumping in sectors such as photocopiers, textiles, footwear and, most importantly for present purposes, shipping services. ² There is no doubt that the dumping by some non-EU shipowners particularly, the former USSR, of their freight rates on the EU markets had a detrimental effect on EU shipowners. ³ The former USSR was able to “dump” shipping services because it had a desire for hard currency, ⁴ a large shipping fleet and a cost base lower than western shipowners because it did not fact the same expenses (e.g. insurance and lower wage costs). The EU responded to such dumping by adopting Council Regulation 4057/86, ⁵ which was the first EU anti-dumping 1008measure to deal with services. ⁶ The purpose of Regulation 4057/86 is to provide a remedy against:

“unfair pricing practices by certain third country ⁷ shipowners engaged in international cargo liner shipping, which causes serious disruption of the freight pattern on a particular route to, from or within the [EU] and cause or threaten to cause major injury to [EU] shipowners operating on that route and to [EU] interests.” ⁸

It is therefore a limited measure in that it relates only to international cargo liner shipping and to behaviour by non-EU State shipowners (i.e. “third country” shipowners). However, it was also a unilateral protectionist measure which the EU would say was justified given the issues involved but nonetheless it was protectionist of EU interests. It favoured shipowners but not consumers. ⁹ It has been commented:

“Regulation 4057 came about because of a desire to promote collective competitiveness: it put new tools into the hands of the [EU], to be used at the discretion of the Council, and was a response to external pressures from Soviet-bloc fleets that (at least since the 1970s) had been poaching cargoes on lucrative runs at below market prices in order to gain hard currency. It was not the subject of dispute between member states, who were in favour of it, nor between members and the Commission. Rather, it was seen as a necessary response to challenge from third countries, and represented an implicit trade-off for shipowners, who were required to open their national markets under regulation [4055/86]. ¹⁰

Yet consumers were adamantly opposed to it, and the debate over the details was between shipowners and consumers; the outcome clearly favoured the former. The reasons for this are largely the same as for [Regulation 4056/86]. First, carriers, as ‘concentrated winners,’ were able to lobby more effectively than consumers, who were ‘dispersed losers’. Consumers did not have [Directorate General for Competition (“DG COMP”)] to bat for them on this measure. Carriers, transport ministers, and [Directorate General for Transport] formed a European version of the iron triangle in which it was assumed that the interests of consumers would not be harmed as much as carriers would benefit. In any case, there was legitimate concern about the impact of third country practices.” ¹¹