Liner shipping companies will be allowed to continue to work together in a wide variety of ways that benefit the flow of international trade and the general public. Liner shipping companies provide joint liner shipping services to customers through agreements are known as “consortia”. Typically, liner shipping companies will agree to enter into vessel-sharing and slot-sharing agreements as part of the consortia.
The significance of extending the life of the Consortia Block Exemption Regulation is that it will continue to allow liner shipping companies to carry on working together to serve customers. In very general terms, the European Union’s competition law regime bans companies in the same sector from working together and any agreements between companies to do so are automatically void.
However, that part of Europe’s competition law can be declared inapplicable if the agreements between companies would contribute to improving the production or distribution of goods and which would allow consumers a fair share of the resulting benefit.
Subsequently, the European Commission issued the Consortia Block Exemption Regulation and any agreement between liner shipping companies to work together is exempt from the general ban on European competition law provided there is a combined market share of less than 30% and that there is no co-operation on prices or market sharing.
Public consultation and findings
The European Commission, the executive arm of the European Union, launched a public consultation and review in September 2018 of the Block Exemption Regulation.
Its findings, announced earlier this week, were that the Block Exemption results in efficiencies for ocean carriers which can then better use the capacity of their ships. Shippers and consignees benefit from lower prices and a better quality of service for consumers.
“Specifically, the evaluation has shown that in recent years both costs for carriers and prices for customers per twenty-foot equivalent unit… have decreased by approximately 30% and quality of service has remained stable”, the European Commission said in a statement.
A welcome and praiseworthy decision
Patrick Verhoeven, Secretary-General of the European Community Shipowners’ Association, warmly welcomed the decision, commenting that it “will greatly benefit liner shipping by allowing for the continuation of a legal framework that has so far proved its usefulness…
“Liner Shipping Consortia increase competition, improve services rendered and foster innovation in a time of rising fuel prices, economic stagnation, stricter environmental rules and a relentless cost-cutting exercise that carriers have undertaken to remain afloat.
“The Commission’s decision is praiseworthy as it removes legal uncertainty from the equation. By doing so, it allows operators to enter or leave consortia agreements based solely on market realities, thus serving the best interest of shippers and carriers, but most importantly, of the consumer”.