The European Commission has decided not to extend the EU legal framework which exempts liner shipping consortia from EU antitrust rules (Consortia Block Exemption Regulation or CBER). The Commission has concluded that the CBER no longer promotes competition in the shipping sector and therefore it will let it expire on 25 April 2024.

The decision follows a review process launched in August 2022, aimed at gathering evidence on the functioning of the CBER since 2020, in view of its expiry on 25 April 2024. The CBER allows shipping lines, under certain conditions, to enter into cooperation agreements to provide joint cargo transport services, also known as “consortia”.

Consortia can lead to economies of scale and better use of the space of 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 aim of the CBER was that customers also enjoy a fair share of the resulting benefits.

‘Shipping services are crucial to European and world trade,’ says Commissioner Didier Reynders, in charge of competition policy. ‘This key sector has undergone significant structural changes, such as carriers’ consolidation, global alliances and vertical integration, resulting in new market conditions, which became apparent during the coronavirus pandemic. Our evaluation has shown that a dedicated block exemption for shipping lines is no longer adapted to those new market conditions. This is why we have decided not to extend the current framework and to let it expire on 25 April 2024.’

Also read: The Consortia Block Exemption Regulation: Continue or repeal?

Ten organisations called for CBER review

Back in July 2022, ten organisations representing container shipping customers and service suppliers, such as the European Association for Forwarding, Transport, Logistics and Customs services (CLECAT), the Federation of European Private Port Companies and Terminals (FEPORT) and the European Shippers’ Council (ESC), called for a review of the CBER to start immediately.

They stated European businesses and other parties in the supply chain had suffered huge disruption to the movement of goods by container shipping since the Regulation was last renewed in April 2020, with many sailings being cancelled or diverted to other ports, and ports being bypassed at short notice. At the same time, shipping rates more than quadrupled on many routes.

The organisations added: ‘The effects of lockdowns on the production of goods and the shifts in demand due to the effects of the Covid pandemic were certainly significant. But the ability of the shipping industry to collectively manage these impacts, and at the same generate profits totalling over USD 186 billion in 2021, at the expense of the rest of the supply chain, and ultimately Europe’s consumers, demonstrate that something is wrong.’

Findings of the evaluation

In August 2022, the European Commission launched a call for evidence inviting feedback from stakeholders on the performance of the CBER. On the same day, it sent targeted questionnaires to the most interested parties in the maritime liner shipping supply chain (that is, carriers, shippers and freight forwarders, ports, and terminal operators) on the impact of consortia between liner shipping companies as well as of the CBER on their operations.

Prior to its evaluation, as part of its sectoral monitoring activities, the Commission had regular exchanges with market participants as well as with competition and regulatory authorities in Europe, the US and other jurisdictions, on the challenges faced by the shipping sector. It also: (i) sent questionnaires to carriers on the effects of the coronavirus pandemic on their operations and on the maritime supply chain; and (ii) commissioned an independent fact-finding study.

Overall, the evidence collected from the stakeholders points towards the low or limited effectiveness and efficiency of the CBER throughout the 2020-2023 period.

Given the small number and profile of consortia falling within the scope of the CBER, the CBER brings limited compliance cost savings to carriers and plays a secondary role in carriers’ decision to cooperate. Furthermore, over the evaluation period, the CBER was no longer enabling smaller carriers to cooperate among each other and offer alternative services in competition with larger carriers.

Cooperation still possible

The expiry of the CBER does not mean that cooperation between shipping lines becomes unlawful under EU antitrust rules. Instead, carriers operating to or from the EU will assess the compatibility of their cooperation agreements with EU antitrust rules based on the extensive guidance provided in the Horizontal Block Exemption Regulation and Specialisation Block Exemption Regulation.

Also read: Europe’s large shipbuilding in dire straits