The EU Commission has announced that it will not extend the Consortia Block Exemption Regulation, which exempts certain consortium agreements in the liner shipping industry from the ban on anticompetitive agreements. As a result, the Regulation will finally expire on 25 April 2024. Even though consortia can continue to exist and new consortia be formed, the legal framework for their admissibility will be subject to the general EU antitrust rules without the current – less strict – special rules and, therefore, will be more stringent in future.
As a general rule, European competition law prohibits companies from entering into agreements that affect trade between Member States and appreciably restrict competition (Article 101(1) of the Treaty on the Functioning of the European Union – “TFEU”). Article 101(3) TFEU provides, however, that certain agreements or categories may be exempt from said prohibition. The EU Commission made use of this provision for consortium agreements in the liner shipping industry by issuing Regulation (EC) No. 906/2009, referred to as the Consortia Block Exemption Regulation (hereinafter, “CBER”), in 2009. According to the CBER, shipping companies may, under certain circumstances, form consortia (frequently in the form of “alliances”) in order to offer and provide joint international liner shipping services from or to one or more Community ports. This sector-specific block exemption thus exempts numerous consortia on a general basis from the prohibition of anti-competitive contractual clauses.
A consortium is an association of shipping companies that agree to pool their respective vessel capacities and jointly organise liner shipping activities. The application of the CBER is limited to liner shipping services, i.e. regular shipping services for the transport of goods in accordance with a timetable. This means that consortia use their vessels jointly and coordinate their timetables with each other. The world’s largest shipping companies are all organised in consortia in the liner shipping business. In order to qualify for an exemption, the consortium members’ combined market share in the relevant market may not exceed 30%, calculated by reference to the total volume of goods carried.
The aim was for shipping companies to benefit from the special treatment under antitrust law in the area of liner shipping because investments are particularly high in that industry. The CBER was intended to enable shipping companies to achieve efficiency gains by better utilising the capacity of their vessels and increasing the number of departures and direct connections, thus improving productivity and the quality of services for the benefit of customers. The CBER aimed at improving the competitiveness of the European liner shipping industry and at developing trade.
Upon adoption of the CBER in 2009, the EU Commission extended it in 2014 and then again in 2020, both times after respective evaluations of the market situation and public consultations. The reason given by the EU Commission for the latest extension was that in previous years, both the costs incurred by the shipping companies and the prices paid by their customers had fallen by about 30% per 20-foot container (TEU) while the quality of the services had remained stable. The EU Commission thus considered the purpose of the CBER to continue to be achieved and the special rules, therefore, to be justified.
However, there was much controversy as to whether the CBER was justified already prior to its most recent extension in 2020.
The shipowners’ associations still consider the special treatment under antitrust law to be justified and necessary. They argue that the CBER brings legal certainty to shipping companies, assuring them that they will be able to continue to provide their services. They claim that the CBER leads to an improved offer of transport services and lower prices, as intended, and that it also brings significant environmental efficiencies. In addition, they hold that the CBER is important for trade routes where the continued existence of several competitors wouldn’t be possible if it wasn’t for the pooling of freight volumes.
The majority of loaders’, forwarding companies’ and port companies’ associations, on the other hand, have been strongly criticising the CBER and its market impact. They claim to be benefitting less and less from the promised advantages. In their opinion, the situation is just the opposite: the exemption is believed to give shipping companies above all significant negotiating and market power and to lead to higher prices; the quality of the services has in their opinion rather declined; they hold that due to of ever bigger vessels, not all ports are (directly) served anymore and that there is a lack of transparency for customers. They further take the view that the consortia coordinate their actions also beyond the specified core area (which is operational agreements aimed at better utilising the capacity of vessels), for example, with regard to the operation of port terminals and hinterland traffic.
In a statement dated 10 October 2023, the EU Commission summarised the findings of the public consultation carried out in 2022 and its evaluation, ultimately siding with those criticising the regulation, according to which another extension of the CBER would not be justified. The EU Commission has based its conclusion in particular on the following considerations:
Even after the expiry of the CBER on 25 April 2024, the existence and formation of consortia will continue to be permitted. However, their admissibility will then no longer be determined by the less strict requirements stipulated in the CBER but by the general EU antitrust rules.
This is why companies will first have to examine, with the assistance of their lawyers, by means of a so-called self-assessment whether the specific co-operation that is being practiced or envisaged for the future has as its object, or brings about, an (appreciable) restriction of competition. If so, the next question to be examined will be whether the requirements for an individual exemption are met. There are four requirements that need to be fulfilled for an exemption:
In an overall assessment, the positive effects on competition will have to outweigh the negative effects. Unlike under the CBER, it will no longer be assumed that the four criteria are fulfilled under the co-operation agreements; instead, their fulfilment will have to be analysed in each individual case and will have to be demonstrable. The new Guidelines on horizontal co-operation agreements, issued by the EU Commission on 1 June 2023 (see https://competition-policy.ec.europa.eu/system/files/2023-07/2023_revised_horizontal_guidelines_en.pdf), provide guidance to companies and also to competition authorities. and national courts on how to assess whether an appreciable restriction of competition exists in any particular case and if so, whether the criteria for an individual exemption are met.
Consequently, the formation of consortia will continue to be permitted, but will require such a case-by-case assessment. Companies that are currently operating in a consortium of the described type should examine timely before the CBER expires whether their consortium can be continued unchanged or whether the co-operation has to be modified or even terminated.