This article is brought to you in association with the European Commission.
The European Commission today launched a call for evidence seeking comments on the performance of the EU legal framework which exempts liner shipping consortia from EU antitrust rules (Consortia Block Exemption Regulation or “CBER”).
Today the Commission also sent targeted questionnaires to interested parties in the liner shipping supply chain (i.e. carriers, shippers and freight forwarders, port and terminal operators ) on the impact of consortia between liner shipping companies, as well as CBER on their operations since 2020.
Interested parties can provide comments for eight weeks, until October 3, 2022.
EU antitrust rules generally prohibit agreements between companies that restrict competition. However, CBER allows, under certain conditions, shipping companies with a combined market share of less than 30% to enter into cooperative agreements to provide joint cargo transportation services, also known as “consortia”.
CBER is due to expire on April 25, 2024. The Commission must therefore carry out an evaluation of CBER on its operation since 2020.
Today’s call for evidence and targeted questionnaires are part of CBER’s assessment. The feedback collected by the Commission will complement the evidence it has collected through its sector surveillance activities. Over the past two years, the Commission has had regular exchanges with market players, such as shippers, freight forwarders and carriers, as well as with competition and regulatory authorities in Europe, the United States and in other jurisdictions, on the challenges facing the shipping industry. In December 2021, as part of its sector surveillance activities, the Commission also launched a fact-finding exercise by sending questionnaires to carriers active on traffic to and from the EU, in order to collect information on the market, in particular on the effects of the coronavirus pandemic on their operations and on the maritime supply chain.
Interested parties can submit their comments to the call for contributions and targeted questionnaires until October 3, 2022.
The assessment will help the Commission decide whether CBER should expire or be extended again, with or without modifications. The Commission will summarize the results of the evaluation in a staff working document which is expected to be published in the last quarter of 2022.
Full details of the assessment are available here.
Liner shipping services include the provision of regular and scheduled shipping of non-bulk cargo (the vast majority in containers) on a specific route. They play a vital role in EU trade and for the EU economy as a whole. They require large investments and are therefore regularly supplied by several shipping companies cooperating in consortia.
Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits agreements between undertakings which restrict competition. However, under Article 101(3) TFEU, such agreements may be declared compatible with the single market provided that they contribute to improving the production or distribution of goods or to promoting technical or economic progress. , while reserving a fair share of the resulting benefits for consumers without eliminating competition.
Council Regulation 246/2009 provides that, in accordance with the provisions of Article 101(3) TFEU, the Commission may exempt consortia from the application of Article 101(1) TFEU for a limited period five years, with the possibility of extension. Accordingly, in 2009 the Commission adopted CBER (Commission Regulation (EC) No 906/2009), which sets out the specific conditions for such an exemption. These conditions are intended in particular to ensure that customers receive a fair share of the resulting benefits.
The Commission extended the validity of CBER in 2014 and 2020. The extension in 2020 was decided because the assessment had shown that despite market developments (increased consolidation, concentration, technological change, increase in vessel size), CBER was always fit for purpose, in line with the Commission’s Better Regulation approach to policy making, and achieved its goals. In addition, consortium agreements that met the conditions set out in CBER continued to meet the conditions set out in Article 101(3) TFEU. More specifically, the Commission found that the Consortium Block Exemption Regulation led to efficiencies for carriers who could better utilize vessel capacity and offer more routes. The exemption only applied to consortia whose market share did not exceed 30% and whose members were free to set their prices independently. In this context, these efficiency gains have translated into lower prices and better quality of service for consumers. More specifically, the evaluation had shown that over the past few years, both the costs for carriers and the prices for customers per twenty-foot equivalent unit (TEU) had decreased by around 30% and that the quality of service was remained stable. The extension was limited to four years, compared to CBER’s traditional five-year term, in order to be able to react more quickly to possible changes in market conditions.