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Consortia exemption extension confirmed by EU

In the midst of the current crisis, container lines need as much help as they can get. The extension of the Consortia Block Exemption Regulation for another four years will be one weight off their minds.

European Commission extends liner consortia rules for further four years.

Shippers will be disappointed with the extension by the European Commission, which they had advocated against.

AMIDST the current turmoil in container shipping, box lines have been thrown a concession in the form of an extension to the European Union’s Consortia Block Exemption Regulation for another four years.

The European Commission had earlier indicated it would extend the CBER for another four years when it released its preliminary findings in a working document last November.

The current CBER was adopted in 2009 and prolonged in 2014 by five years, and was due to expire on April 25, 2020.

In 2018, the commission launched a public consultation and conducted an evaluation of the regulation, which included consultation with stakeholders across the supply chain.

“The evaluation has shown that despite evolutions in the market (increased consolidation, concentration, technological change, increasing size of vessels) the CBER is still fit for purpose, in line with the commission’s ‘Better Regulation’ approach to policy-making, and delivers on its objectives,” the commission said in a statement.

“Specifically, the commission has found that the CBER results in efficiencies for carriers that can 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, it added.

“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 teu have decreased by approximately 30% and quality of service has remained stable.”

The World Shipping Council, which represents the major international container carriers, commended the decision, which it said offered a “safe harbour” for vessel sharing agreements.

“The liner shipping industry has maintained support for the CBER because it creates legal certainty for the use of vessel sharing agreements, which are essential operating tools used by carriers to provide customers with better services at lower cost and with improved environmental performance,” said World Shipping Council chief executive John Butler.

“Vessel sharing is the backbone of the global liner shipping network, and we should not underestimate the value of this tool for smaller carriers and lower volume trade lanes where demand might not otherwise support as many competitors.”

He added that the exemption allowed consortia to pool vessels together and provide services or frequencies that carriers would not be able to provide on their own means, and to pass on cost efficiencies to customers.

Shippers, however, will be disappointed with the extension, which they had advocated against.

Reed Smith partner Marjorie Holmes, a long-time advocate of the block exemption, welcomed the extension, based on the commission’s evidence-based review of how it had worked to bring flexibility for lines to cooperate and respond to the changing demands of shippers.

“While regulation 1/2003 assessments can be carried out, the regulation is simple and has the advantage of being clear on issues such as how to calculate market share and initial or lock in periods,” she told Lloyd’s List.

“The regulation is also influential across the world, so that I would expect other countries around the world with similar exemptions in place to also extend their exemptions when the time for review comes around.”

The International Chamber of Shipping also added its support to the move.

“We appreciate the thorough process and commend the European Commission for taking this decision,” said ICS deputy secretary-general Simon Bennett.

“While the commission arrived at its important decision before 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.”

But the decision has met with resistance from others in the supply chain.

Writing following the publication of the working document, International Transport Forum ports and shipping expert Olaf Merk said there were fears of a “cartel-like constellation” emerging under the guise of the current regime.

Joint capacity planning for “adjustments in response to fluctuations in supply and demand” is allowed by the block exemption, Mr Merk said.

“But there is evidence that carriers might have co-ordinated orders for new mega ships as well as the timing of ship dismantling within alliances.”

Additionally, blank sailings were done simultaneously by different consortia and alliances.

“While some interpret this as joint ‘capacity adjustments in response to fluctuations in supply and demand’, others might suspect concerted action to influence freight rates,” Mr Merk said. “Because the different shipping consortia and alliances are heavily intertwined, even detailed co-ordination between them is not particularly difficult.”

Source: Lloyds List



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