ICS welcomes controversial extension of EU anti-trust exemption on cargo shipping

The EU flag. Credit: European Union

The International Chamber of Shipping (ICS) welcomed news on March 24 that cargo shipping companies will continue to be exempted from an EU anti-trust rule, the Consortia Block Exemption Regulation (CBER), until 25 April 2024. The exemption was first adopted in 2009, then extended until 2014, and now has been stretched to 2024.

The EU CBER rule outlines conditions under which liner shipping consortia can provide joint services without infringing EU anti-trust rules that prohibit anti-competitive agreements between companies, allowing for operational co-operation in service of economies of scale and smarter utilisation of space on the vessels.

“While the Commission arrived at its important decision before [the coronavirus disease 2019] COVID-19 took hold, the knowledge that co-operative vessel sharing arrangements can continue with legal certainty will assist the recovery of global maritime trade once the current crisis is over,” said ICS deputy secretary general Simon Bennett.

However, not all in the maritime industry may welcome this news. There were arguments in the past that this extension ignored concerns of exporters and importers to and from the European Union, as well as their global suppliers and customers. In 2019, organisations representing stakeholders from the maritime logistics industry, such as the Global Shippers Forum (GSF), called for an in-depth review of the CBER as well as a repeal, unless a revised regulatory framework was adopted to clarify the current regulation. The CBER framework had not been thoroughly reviewed since 2009.

In February 2020, the Federation of European Private Port Companies and Terminals took note of these objections as well as the Commission’s response that it “will continue to simplify the analysis of consortia’s compliance with competition rules, limit the dependency on external advice, and reduce legal costs”.

James Hookam, the secretary-general of the GSF, pointed out in a November 2019 statement that while similar pooling arrangements were available in the aviation sector, these were seen to be fully compatible with EU competition law without the need for a block exemption. He questioned why the maritime industry would need this exemption. Moreover, the GSF questioned whether the CBER was any sort of remedy to the current state of shipping, which has historically low shipping rates and overcapacity on many routes. The GSF also criticised the anti-trust rule on its perceived lack of competitive pressures.

Many of the associations of users, operators, and service providers in the supply chain that took part in a 2018 consultation over the regulation shared the view that the counterarguments made by the Commission in the aftermath had ignored their concerns. They listed multiple flaws in CBER, should it be continued: missing data, one-sided assumptions on efficiency gains that disregarded non-rate-related parameters, lack of a proper definition of relevant geographic markets to assess market shares, and a complete failure to identify remaining benefits to users.

Nicolette van der Jagt, director general of the European Association for Forwarding, Transport, Logistics and Customs Services (CLECAT) stated that the decision to proceed with the extension appeared to be based largely on the idea that the CBER saves money for the shipping lines and cuts down on the red tape in the Commission. She noted that this dismissed the views of the other parties in the maritime supply chain who were not benefiting from a similar exemption, but in many cases are competing with carriers on services.

The EU competition watchdog, responding to the call for review, said they received feedback indicating that this regulation continues to offer benefits to the liner shipping industry. The EU competition enforcer said, “The consortia block exemption regulation results in efficiencies for carriers that can better use vessels’ capacity and offer more connections.”

EU anti-trust regulators appeared to agree, noting in their statement that the exemption has led to lower prices and better consumer services.

Despite these concerns, the ICS has noted that the decision by the EU anti-trust regulators is likely to influence the positions taken by competition authorities worldwide.