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EC confirms Consortia Block Exemption rules


The European Commission has concluded that consortia can lead to economies of scale and better use of space on vessels – despite concerns among forwarders


Despite an appeal from forwarding associations, on 24 March 2020 the European Commission prolonged for another four years the regulation outlining the conditions under which liner shipping consortia can provide joint services without infringing EU antitrust rules. These rules prohibit anti-competitive agreements between companies. This regulation, known as the Consortia Block Exemption Regulation (Consortia BER), is therefore extended until 25 April 2024. Liner shipping consortia are agreements


between shipping companies to operate joint liner shipping services and engage in certain types of operational cooperation leading to economies of scale and a better utilisation of the space on vessels. BIFA had fed into the consultation, expressing concerns mainly about how carriers collected and stored shipment data. EU law generally bans agreements between


companies that restrict competition. However, the Consortia BER allows, under certain conditions, liner shipping operators with a combined market share of below 30% to enter


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into cooperation agreements to provide joint liner shipping services (known as consortia). These agreements, however, cannot include price fixing or market sharing. The current Consortia BER was adopted in


2009 and prolonged in 2014 by five years, and was due to expire on 25 April 2020.


The consultation findings In September 2018, the Commission launched a public consultation and conducted an evaluation of the Consortia BER, which included a wide consultation of stakeholders in the maritime liner shipping supply chain. The findings of the evaluation were summarised in a Staff Working Document, which was published in November 2019. According to the Commission, the evaluation


showed that despite evolution in the market (increased consolidation, concentration, technological change, increasing size of vessels) the Consortia BER is still fit for purpose, in line with the Commission’s ‘Better Regulation’ approach to policymaking, and delivers on its


objectives. Moreover, the consortia agreements that meet the conditions set out in the Consortia BER continue to satisfy the conditions laid down in Article 101(3) TFEU. More specifically, the Commission has found


that the Consortia BER results in efficiencies for carriers that can better use vessels’ capacity and offer more connections. The exemption only applies to consortia with a market share not exceeding 30% and whose members are free to price independently. The Commission concluded that these efficiencies result in lower prices and better quality of service for consumers. Specifically, the evaluation has shown that in recent years both costs for carriers and prices for customers per 20 ft equivalent unit (teu) have decreased by approximately 30%, and quality of service has remained stable.


Commission explanation The Commission concluded that the consortia can


(1)


lead to economies of scale and better use of


space on the vessels. A fair share of the benefits resulting from these efficiencies can be passed on to the users of the shipping services in terms of better coverage of ports and better services. The Commission decided therefore to prolong the validity of the regulation for four years. Given the market volatility since the 2008


crisis, stemming from the inability of carriers to balance supply and demand, plus the fact that as recently as Q2 2018 schedule reliability was at an all-time low, many have questioned the correctness of this decision. As Clecat has highlighted, the language is interesting; the word “can” as opposed to “does” is used above


(1) .


Also, it should be noted that this extension will last only for four years, not the customary five.


June 2020


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