EC to end container shipping alliances

On the 9th August 2022, the European Commission (EC) issued a call for feedback on the Consortia Block Exemption Regulation (CBER) and on Tuesday announced that it will not renew the sector’s exemption to operating shipping alliances when current legislation expires on 25th  April.

The Consortia Block Exemption Regulation (CBER) was introduced in 2009, after the EC banned the old conference system, that had allowed container shipping lines to coordinate on pricing levels.

CBER allowed carriers to continue operating vessel-sharing agreements and pooling capacity, and was extended in 2014 and 2020, but the EC has now decided that CBER is not fit for purpose, as it does not fulfil the criteria of effectiveness, efficiency and EU added value.

The Block Exemption has been under review since 2020, during which time the market has experienced massive fluctuations in demand, capacity and price, driven by the initial impact of COVID, pandemic lockdown, post-COVID demand and now the cost of living crisis.

A period over which, market turmoil should have underlined the need for cooperation between carriers, but instead resulted in a transitory and exceptional phase of excess demand over effective capacity and of record profits for carriers.

The EC’s decision paper said the feedback from carriers and lobby groups showed an incomplete understanding of the CBER and claimed it had failed to bring demonstrable benefits to European consumers, as inelasticity of demand and the limited elasticity of supply reduced the likelihood that any cost efficiencies achieved by carriers would be passed on to users.

The EC refused to blame CBER for causing the chaos seen in container supply chains since 2020, but suggested its effectiveness and efficiency during this period was limited and noted that the widespread opposition from shippers, forwarders, unions and port operators to extending the regulation showed deep divisions among supply chain partners.

The CBER has notably created the impression that carriers had an advantage, while other supply chain stakeholders were treated unfairly and that there was no real level playing field in the maritime sector.

It concluded: “Overall, it appears that the restoration of trust between the stakeholders necessary to build a resilient, integrated and efficient supply chain requires ensuring that the liner shipping sector is not perceived as being subject to looser scrutiny from antitrust enforcers than other industries.”

UK review of Consortia Block Exemption Regulation

On the 19th January the UK’s Competition and Markets Authority (CMA) published its report into whether or not the Liner Shipping Consortia Block Exemption Regulation (the retained CBER) should be renewed or varied when it expires on 25 April 2024.

In its CBER review, the CMA met with key stakeholders to gather views on the operation of the retained CBER regime in the UK and is proposing replacing the retained CBER with a Liner Shipping Consortia Block Exemption Order (CBEO).

The CMA added it recommended a similar version of the existing CBER, in order to ensure the continuity of container shipping for UK businesses, because if the retained CBER was allowed to expire without replacement, carriers may be deterred from making direct calls to UK ports in favour of serving the UK by transhipment to and from European ports.

The CMA’s concern was that shipping costs for UK consumers could rise considerably without a regulation aligned to the substantially larger market on the European mainland.

With the EU now intent on ending CBER next April, it is almost certain that the UK will follow suit.

Metro leverage opportunities for our customers across all three of the shipping alliances, with individual carrier relationships that are long established and built on personal relationships, from operations to senior management and executive level.

These relationships across a portfolio of carrier partners, already give our customers access to the widest range of service offerings, port-pairings and rates and they will be maintained, however the container shipping sector is transformed next April.

We will stay close to this topic, as it develops and ensure that you are kept up to date with the most important news. 

If you have any questions or concerns relating the shipping alliances, the Consortia Block Exemption Regulation, or sea freight in general, please EMAIL Andrew Smith, Metro’s Chief Commercial Officer.