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06 Nov 2023

End of antitrust exemption for liner shipping consortia: what will be the consequences for future cooperation between carriers?

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The European Commission ("Commission") recently announced that it will not extend the European Union (“EU”) legal framework exempting liner shipping consortia from EU antitrust rules, known as the Consortia Block Exemption Regulation1 (“CBER”), which will now expire on 25 April 2024.2

What was the aim of the CBER?

Liner shipping consortia are agreements between shipping companies to operate joint liner shipping services allowing parties to engage in certain types of operational cooperation leading to economies of scale and a better use of space on vessels. Such consortia were also considered to result in improved productivity and better quality of service.

Since 2009, the CBER allowed, under certain conditions, liner shipping operators to enter into such forms of cooperation to provide joint liner shipping services. In particular, the consortia could not contain any hardcore restrictions, must not have a market share exceeding 30% and must give members the right to withdraw from the consortia with a six month notice period (12 months in highly integrated consortia). 

The CBER had an initial five-year duration and was extended in 2014 by a further five years. Following a consultation launched during 2018, the Commission concluded that despite developments in the market, such as mergers between players and technological developments, the block exemption regulation remained fit for purpose and still generated efficiency gains for liner shipping companies which could make better use of vessel capacity. In 2020 the Commission decided to extend the validity of the CBER for an additional four years.

The recent Commission decision not to extend the CBER means it will now expire on 25 April 2024.

Evaluation launched by the European Commission

In August 2022, the Commission launched a call for evidence, inviting feedback on the performance of the CBER, and sent targeted questionnaires to market players including carriers, shippers and freight forwarders, ports and terminal operators.  The evidence was to help the Commission to decide whether it was necessary to repeal the block exemption regulation for shipping consortia or to extend it again, with or without amendments.

The evidence collected from stakeholders showed limited effectiveness and efficiency of the exemption regime throughout the period 2020-2023.3

Given the small number of consortia falling within the scope of the CBER, the Commission considered that the scheme offered carriers only limited savings on compliance costs and played a secondary role in carriers' decision to cooperate. The evaluation also revealed that this exemption no longer enabled smaller carriers to cooperate with each other and offer alternative services in competition with the major carriers.

The Commission therefore decided not to extend the scheme beyond 25 April 2024, when the current regulation expires.

What are the consequences following the expiry of the CBER?

According to the Commission, "the expiry of the CBER does not mean that cooperation between carriers would be prohibited under article 101 TFUE". Such arrangements will not be automatically illegal.

The expiry of the exemption regime instead brings shipping companies under the common regime of antitrust rules which apply to all economic sectors.

This means that current and future cooperation between carriers will have to be reviewed on a case-by-case basis. Carriers engaging in any consortia to or from the EU will have to self-assess the compatibility of their cooperation agreements with competition law rules using the guidance provided in the recently revised Horizontal Guidelines4 and Specialisation Block Exemption Regulation.5

The Commission also made it clear in its Q&A6 that, at this stage, it had no plans to adopt sector-specific guidelines after the expiry of the CBER, and that carriers would have to self-assess the compatibility of their collaboration with competition law rules.

Future consortia may be subject to increased supervision by competition authorities. A detailed assessment of the cooperation project with regard to the competition law rules applicable to agreements between competitors should therefore be carried out before any such a collaboration is implemented.

Impact on retained CBER in UK

On 17 November 2023, the CMA reached a provisional decision that it will not be recommending a replacement of the retained CBER in the UK. The authority's view is therefore that the regulation should lapse on 25 April 2024 without renewal or replacement.

In doing so, the CMA has U-turned on its earlier recommendation that a modified version of CBER should be introduced into UK legislation, under similar terms but tailored to UK needs.

Following an industry assessment, the CMA have provisionally concluded that consortia covered by the retained CBER do not produce efficiencies which outweigh their potential impact on competition; and further that there are insufficient benefits to a sector-specific block exemption as compared to assessment under ordinary competition law.  

This decision from the CMA appears to have been welcomed by many in the industry, however the CMA has requested further feedback by 15 December 2023 on its recommendation before it presents its final decision to the Secretary of State for Business and Trade.

If you would like any further information or background on the decision of the Commission not to extend the CBER, or any guidance to assess compliance with competition law rules of future cooperation between carriers, please contact a member of our competition team.

 
 

 

1 Commission Regulation (EC) No 906/2009 of 28 September 2009 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia).

4 Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements.

5 Commission Regulation (EU) 2023/1067 of 1 June 2023 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of specialisation agreements.

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