FEPORT: No surprise, yet, not a normalization either
On October 10th, 2023, the EU Commission decided not to extend the Consortia Block Exemption for Liner Shipping. The end of the “status quo era” is not really a surprise as it was expected that the EU Commission would, at last, acknowledge that the changing nature of the container shipping sector that has seen massive horizontal and vertical consolidation over the past decade probably facilitated by specific exemptions, and the pandemic that saw freight rates skyrocket significantly require action.
FEPORT was not in favour of a repeal of the CBER as clear prohibitions stated in a block exemption Regulation are better than a legal void and no monitoring from the EU commission of the behaviour of the alliances.
FEPORT has always alerted about the interlinkages between consortia and alliances which have been totally neglected by the EU Commission in its previous assessments. The bargaining power of the alliances towards customers and service providers has been tremendously also increased thanks to the 2009 version of the CBER.
Indeed, the current version of the CBER (EC) which dates from 2009 was unfortunately too loose on some aspects as it did not clearly mention the do’s and don’ts. For instance, neither the prohibition of the joint purchasing of cargo handling services/port services to restore a more balanced situation for terminals and techno nautical services (as mentioned in the OSRA 2022) nor the strict restriction, in a context of accelerated vertical integration, of exchange of data and any other form of information only to the shipping leg were explicitly stated in the text. Moreover, the 2009 CBER did not include anymore (as it was the case in the previous version) the withdrawal provision of the block exemption in case of ineffective competition and insufficient consultations with transport users and service providers. The removal of the withdrawal clause has practically excluded the possibility for customers and service providers to question the benefits of CBER before the end of the five years i.e., a very long period of time.
The CBER has at its peak covered up to 60 consortia. The container shipping’s three main shipping alliances, 2M, Ocean Alliance and THE Alliance, are considered “consortia”, as consisting of a matrix of vessel sharing agreements among alliance partners and others. And although, in the last review that took place in 2019, the EU Commission recognized that it was not able to assess the interlinkages between alliances and consortia and whether alliances which benefited from the CBER were having a market share beyond 30%, it has decided to renew the block exemption.
While the expiration of the current CBER does not make cooperation between shipping lines illegal, carriers will need to assess the compatibility of their agreements with EU antitrust rules based on the guidance provided in the Horizontal Block Exemption Regulation and Specialisation Block Exemption Regulation. It remains to be seen whether the repeal of the CBER will have the same impact on different carriers depending on their size and the trades they operate in. Some observers consider that big players have probably already anticipated the end of the CBER and already started reorganizing themselves individually. They will need to ensure they are compliant with competition rules. Smaller carriers however could be put off from operating in European markets due to the additional administrative burden.
The end of the CBER constitutes an important step towards the normalization of the liner shipping markets. However, the abolition of special antitrust law does not mean the end of the major alliances in container shipping. For a long time, in principle, whenever their market shares exceeded 30%, they have been operating outside the legal framework that has now been overturned. The European Commission should now set clear limits on the market behaviour of large alliances and rigorously enforce existing law. This is the condition for a successful normalization of the market in the coming years.