The European Commission will review the regulation that allows cooperation among liner shipping companies to see if it is still “relevant and delivering on its objectives” in light of the mergers and consolidation that have occurred in the industry in recent years.
In an “evaluation roadmap” the EC’s Directorate-General for Competition explained that the Treaty on the Functioning of the European Union generally prohibits agreements between businesses that restrict competition. In 2008, the EC prohibited carriers from participating in shipping conferences, but under a provision in the treaty, it has allowed liner companies to continue to participate in consortia through block exemption regulation that was first adopted in 1995 and has been extended and amended four times. The most recent extension expires April 25, 2020.
Those kind of exemptions are allowed if “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 benefit.”
Liner carriers, for example, say that by sharing space on ships and cooperating in groups such as the Big 3 shipping alliances — the 2M, Ocean Alliance and THE Alliance — shippers benefit from more frequent service, service between a wider choice group of port pairs and economies of scale that would be impossible if they operated alone.
John Butler, the chief executive officers of the World Shipping Council, the main trade association for the liner shipping industry said his organization says it “strongly supports continuation of the regulation. Vessel sharing is
the backbone of many liner services, and it provides better service and
greater efficiency than could be provided without vessel sharing. That
leads to both economic
and environmental benefits (the latter in the form of lower air
emissions, including GHG emissions). The Block Exemption Regulation
provides everyone with a common understanding of how competition law
applies to vessel sharing. That creates legal certainty
that allows participants to maximize economic benefits without having
to take on unnecessary legal risk. There is broad policy support for
vessel sharing; having a clear statement of the law that supports that
policy makes the policy work better for everyone."
“In recent years, given the challenging economic context, the liner shipping industry has been undergoing a significant process of consolidation. Some carriers exited the market, merged or cooperate in increasingly larger consortia and some continue to cooperate in smaller consortia. Under such circumstances, the question arises of the continued relevance of the regulation,” the EC said.
The EC is seeking input on whether the block exemption facilitates economically efficient cooperation that also benefits consumers, helps businesses cut costs or whether it increases compliance costs, is still relevant given developments in industry and in line with its general policy of harmonizing competition rules instead of having special rules for each sector of the economy.
The EC said it will launch a 12-week consultation in the third quarter of 2018 and solicit the views of the public including carriers, shippers, freight forwarders, associations, attorneys, industry analysts, academics and law firms as well as competition authorities in individual countries.