US antitrust Commission seeks feedback on performance of exemption for liner shipping consortia
The European Commission has launched a call for evidence inviting feedback on the performance of the EU legal framework which exempts liner shipping consortia from EU antitrust rules (Consortia Block Exemption Regulation or ‘CBER'), according to The European Commission's release.
The Commission has also sent targeted questionnaires to interested parties in the maritime 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 of the CBER on their operations since 2020.
Interested parties can provide comments for eight weeks, until 3 October 2022.
EU antitrust rules generally ban agreements between companies that restrict competition. However, the CBER allows, under certain conditions, shipping lines with a combined market share of below 30% to enter into cooperation agreements to provide joint cargo transport services, also known as ‘consortia'.
The CBER is due to expire on 25 April 2024. The Commission therefore needs to carry out an evaluation of the CBER on how it has functioned since 2020.
Today's call for evidence and targeted questionnaires are part of the evaluation of the CBER. The feedback collected by the Commission will complement the evidence it has collected as part of its sectoral monitoring activities. Over the last two years, the Commission has had regular exchanges with market participants, such as shippers, freight forwarders and carriers, as well as with competition and regulatory authorities in Europe, the US and other jurisdictions, on the challenges faced by the shipping sector. In December 2021, as part of its sectoral monitoring activities, the Commission also started a fact-finding exercise by sending questionnaires to carriers active on trades to and from the EU, to collect market information, 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 evidence and targeted questionnaires until 3 October 2022.
The evaluation will help the Commission decide whether the CBER should expire or be extended again, with or without amendments. The Commission will summarise the results of the evaluation in a Staff Working Document that is planned to be published in the last quarter of 2022.
Liner shipping services comprise the provision of regular, scheduled non-bulk maritime cargo transport (the vast majority in containers) on a specific route. They play an essential role in EU trade and for the EU economy as a whole. They require significant levels of investment and therefore are regularly provided by several shipping companies cooperating in consortia.
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 from the application of Article 101(1) TFEU for a period limited to five years, with the possibility of extension. Accordingly, the Commission adopted in 2009 the CBER (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.
The Commission prolonged the validity of the CBER in 2014 and 2020. The prolongation in 2020 was decided because the evaluation had shown that despite evolutions in the market (increased consolidation, concentration, technological change, increasing size of vessels) the CBER was still fit for purpose, in line with the Commission's "Better Regulation" approach to policy-making, and delivered on its objectives.
Moreover, the consortia agreements that met the conditions set out in the CBER continued to satisfy the conditions laid down in Article 101(3) TFEU. More specifically, the Commission had found that the Consortia Block Exemption Regulation resulted in efficiencies for carriers that could better use vessels' capacity and offer more connections.
The exemption only applied to consortia with a market share not exceeding 30% and whose members were free to price independently. In that context, those efficiencies resulted in lower prices and better quality of service for consumers. Specifically, the evaluation had shown that in recent years both costs for carriers and prices for customers per twenty-foot equivalent unit (TEU) had decreased by approximately 30% and quality of service had remained stable.
The extension was limited to four years, compared to the traditional five-year duration of the CBER, to be able to react more promptly in the event of any possible changes in market circumstances.
