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  • 2020 March 25 18:06

    The European Commission prolongs the validity of block exemption for liner shipping consortia

    The European Commission has prolonged for another four years the regulation outlining the conditions under which liner shipping consortia can provide joint services without infringing EU antitrust rules that prohibit anticompetitive agreements between companies. This regulation known as the “Consortia Block Exemption Regulation” is therefore extended until 25 April 2024. More specifically, 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.

    EU law generally bans agreements between companies that restrict competition. However, the Consortia Block Exemption Regulation allows, under certain conditions, liner shipping operators with a combined market share of below 30% to enter 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 Block Exemption Regulation was adopted in 2009 and prolonged in 2014 by five years, and was due to expire on 25 April 2020.
     
    In September 2018, the Commission launched a public consultation and conducted an evaluation of the Consortia Block Exemption Regulation, 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 on the webpage of the consultation.

    The evaluation has shown that despite evolutions in the market (increased consolidation, concentration, technological change, increasing size of vessels) the Consortia Block Exemption Regulation is still fit for purpose, in line with the Commission's "Better Regulation" approach to policy- making, 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 Block Exemption Regulation 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. In that context, those 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 twenty-foot equivalent unit (TEU) have decreased by approximately 30% and quality of service has remained stable.

    The Commission decided therefore to prolong the validity of the Regulation for four years.
     
    Liner shipping services comprise the provision of regular, scheduled non-bulk maritime cargo transport (the vast majority in containers) on a specific route. They require significant levels of investment and therefore are regularly provided by several shipping companies cooperating in "consortia" agreements. 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.

    Article 101(1) of the Treaty on the Functioning of the European Union ("TFEU") prohibits agreements between companies that restrict competition. However, under Article 101(3) TFEU, such agreements can be declared compatible with the Single Market provided they contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefits without eliminating competition.

    Council Regulation 246/2009 provides that, in accordance with the provisions of Article 101(3) TFEU, the Commission may exempt consortia agreements from the application of Article 101(1) TFEU for a period limited to five years, with the possibility of prolongation. Accordingly, the Commission has adopted the Consortia Block Exemption Regulation (Commission Regulation (EC) No 906/2009), which sets the specific conditions for such an exemption. These conditions notably aim at ensuring that customers enjoy a fair share of the resulting benefits.


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