The European Commission (EC) has decided to axe an important competition exemption for the maritime industry next year.
In a press release, the EC said that the Consortia Block Exemption Regulation (CBER) will not be extended:
“Overall, the CBER does not appear to be fit for its purpose anymore, as it does not fulfil the criteria of effectiveness, efficiency and EU added value.”
As it stands, the exemption will expire on 25 April 2024.
In August 2022, the EC launched an evidence-gathering exercise on the CBER, which had allowed shipping companies with a combined market share of below 30% to enter into cooperation agreements or consortia to provide joint cargo transport services.
At the time, many within the industry complained about high profits enjoyed by shipping firms while the rest of the maritime trade suffered from long-backlogs and higher costs in the supply chain.
Competition law
EU law generally bans agreements that restrict competition. However, certain deals and arrangements may be permitted under ‘block exemptions’ issued by markets watchdogs, where the benefits are seen as outweighing the anti-competitive effects.
Since 2009, the CBER has allowed shipping companies to form these consortia and work together on key shipping lines, allowing cargo from rival firms to be placed on each other’s ships.
In its evidence document, the EC stated that there was “limited” evidence that the exemption was saving businesses money on compliance costs, and that CBER was no longer helping smaller carriers work together to offer alternative services to larger firms.
‘Big deal’
Mike Garratt, director at shipping consultancy MDS Transmodal, told the FT that the EC’s decision was “a big deal”:
“[This] has dramatic implications for the deep sea shipping sector.”
However, the World Shipping Council, which represents many liner services, said it disagreed with the “logic behind the recommendation.”
“The shift to general EU antitrust rules will create a period of uncertainty as carriers adjust to the new legal structure,” said John Butler, president & CEO of the council.
The EC said that other exemptions would still apply and that the expiry of the CBER does not mean that cooperation between carriers would be prohibited.
UK to ‘follow suit’?
Steve Parker, director general of the British International Freight Association (BIFA), welcomed the news and called for the UK government to follow suit:
“The sensible conclusion to the ongoing container market public consultation being conducted by the UK’s Competition and Markets Authority (CMA) would be to introduce an ombudsman to arbitrate on complaints as a minimum.
“Ideally, it would follow the EC’s lead and not retain the equivalent of a block exemption regime for the liner shipping industry in the UK, when the current one expires in April 2024.”
In January 2023, the CMA also consulted on the Liner Shipping Consortia Block Exemption Regulation, the retained version of CBER post-Brexit.
In the consultation document, the CMA provisionally said that the UK exemption “remains a relevant and useful tool for businesses,” and suggested keeping it with some modifications.
The CMA’s consultation has since closed, and the UK’s competition watchdog is said to be reviewing responses.
