European Commission withdraws exemption for cargo shipping
Carriers confirmed that consortium moves are guided by commercial needs & antitrust rules play a subordinate role
The European Commission has decided not to renew the Consortia Block Exemption Regulation (CBER) introduced in 2009 exempting liner shipping consortiums.
The decision comes after a review process initiated in August 2022 with the CBER set to expire on April 25, 2024, says a release from the European Commission.
"Overall, the CBER does not appear to be fit for its purpose any more as it does not fulfil the criteria of effectiveness, efficiency and EU added value. This conclusion is based on the information submitted by stakeholders in respect of the 2020-2023 period, and other evidence collected in the course of the evaluation in relation to the functioning of the container shipping sector and the contribution of consortia to the competitiveness of this sector. The evidence collected during the evaluation process is inconclusive as to the continued relevance and coherence of the CBER."
CBER allows liner shipping operators with a combined market share below 30 percent to improve operational efficiency to benefit EU nations while ensuring that competition compliance laws are upheld. The CBER had twice been extended in 2014 and 2020.
“We appreciate the European Commission’s recognition of the many benefits of vessel sharing to European industry and consumers even if we disagree with the logic behind the decision to discontinue the CBER," says John Butler, President & CEO, World Shipping Council (WSC). "The shift to general EU antitrust rules will create a period of uncertainty as carriers adjust to the new legal structure. Nevertheless, vessel sharing agreements will remain a fully legal and supported way for carriers to ensure efficient and sustainable transport for Europe."
"Over the 2020-2023 evaluation period, consortia remained a prevalent feature of the sector even though large carriers became less reliant on alliances. By contrast, with the stability seen in the prevalence of consortia, the evaluation period has been characterised by dramatic changes in other market circumstances that had previously been identified as driving the need for cooperation between carriers.
"More specifically, the evaluation period has seen a transitory and exceptional phase of excess demand over effective capacity and of record profits for carriers. This transitory and exceptional phase has temporarily interrupted the trend towards oversupply and low profitability in the sector. In terms of the level of concentration during the evaluation period, the liner shipping sector did not undergo any major operation of horizontal consolidation. The trend towards vertical integration of carriers continued, with substantial investments in port, terminal and logistics operations."
The small number of unique consortia falling within the scope of the CBER in 2020, "and the profile of the consortia (always involving one of the top-five carriers which was also a member of a non-exempted consortium on the same trade) tend to show that the CBER brought limited compliance cost savings to carriers and was no longer fulfilling its goal of promoting competition by enabling smaller carriers to cooperate between themselves and offer alternative services in competition with larger carriers."
Carriers confirmed that the decision to enter into a consortium is guided by commercial needs, and that antitrust rules play – at most – a subordinate role, the update added. "As an illustration, no carrier has identified the CBER, or more generally the scope of the applicable antitrust exemption, as a factor for the decision to enter into a consortium or for the allocation of capacity between independent and joint services or between joint services."
The subordinate role played by antitrust rules may be explained by limited compliance costs compared to the carriers’ operating costs, EU said in its note.
WSC is reviewing the basis for the Commission's position and "looks forward to further dialogue to ensure regulatory clarity."