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EU prolongs block exemption for liner shipping consortia

EU prolongs block exemption for liner shipping consortia
The regulation was due to expire in April 2020

The European Commission has extended the controversial Consortia Block Exemption Regulation, which allows container shipping lines to operate in alliance structures, for another four years until April 25, 2024.

It cited efficiencies for carriers resulting in lower prices and better services for consumers as the reasons behind its decision, which deviates from its usual policy to act against agreements that restrict competition.

The regulation outlines the conditions under which liner shipping consortia can provide joint services without infringing EU antitrust rules that prohibit anti-competitive agreements between companies.

Shipping companies are allowed to operate joint liner shipping services and engage in certain types of operational cooperation leading to economies of scale and a better utilisation of the space on vessels.

Although EU law generally bans agreements between companies that restrict competition, the block exemption allows, under certain conditions, carriers with a combined market share of below 30% to enter into cooperation agreements to provide joint liner shipping services (known as “consortia”). These agreements, however, cannot include price-fixing or market-sharing.

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

In September 2018, the Commission launched a public consultation and conducted an evaluation of the regulation, including a consultation of stakeholders in the maritime liner shipping supply chain.

In its view, despite evolution in the market (increased consolidation, concentration, technological change, increasing size of vessels) the regulation is still fit for purpose.

The Commission believes that the regulation results in efficiencies for carriers that can better use vessels’ capacity and offer more connections.

The exemption only applies to consortia with a market share not exceeding 30% and whose members are free to price independently.

In that context, those efficiencies result in lower prices and better quality of service for consumers, it noted in a statement.

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.