On 10 October 2023 the EU Commission concluded their evaluation of the Consortia Block Exemption Regulation. After evaluating inputs from various stakeholders and interested parties, the Commission decided not to extend the regulation. The Consortia Block Exemption Regulation will expire in April 2024.
The EU Commission has evaluated the Consortia Block Exemption Regulation (CBER) and decided not to extend the regulation. The decision comes after a turbulent period in the market for liner shipping services, where especially the emergence of COVID-19 caused disruptions in the market.
Since 2009, CBER (Commission Regulation (EC) No 906/2009) has exempted certain categories of agreements, decisions, and concerted practices between liner shipping companies (consortia) from the prohibition of Article 101(1) TFEU. The regulation had an initial 5-year duration but was extended in both 2014 and 2020. With the EU Commission’s recent decision not to extend the CBER, it will expire on 25 April 2024.
The exemption allows liner shipping companies to cooperate in joint operation of maritime transport services, with the object of improving services that would be offered individually in the absence of such consortia. The application of the CBER, however, is subject to certain conditions, meaning the consortia must; i) not contain hardcore restrictions, ii) not have a market share exceeding 30%, and iii) give the members the right to withdraw from the consortia with a 6-month notice (12 months in highly integrated consortia).
The reason for the introduction of a block exemption was that the Commission found joint service agreements between liner shipping companies to result in more efficient use of vessel capacity, improved productivity and better quality of services. This was likewise found to be the case at the time of the previous extensions in 2014 and 2020.
In the recent evaluation of the CBER, which saw its beginning in August 2022 and was concluded by the decision on 10 October 2023, the Commission launched a call for evidence and reviewed numerous inputs from both carriers and other affected or interested parties. The non-carrier parties generally called for strengthened supervision instead of administrative simplification, and ultimately this request was met by the Commission.
The Commission’s decision to let the CBER expire is both based on the evidence collected from stakeholders and from the Commission’s assessment of the market development in recent years. The evaluation found that, overall, the evidence collected from the relevant stakeholders points toward a low or limited effectiveness and efficiency of the CBER in the period from the evaluation in 2020 to the recent evaluation concluded in 2023.
Based on a small number and profile of consortia falling within the scope of the CBER, the Commission also found the CBER to bring limited compliance cost savings to carriers and that the CBER plays a secondary role in carriers’ decision to cooperate. Lastly, the Commission found that the CBER in the evaluation period no longer enabled smaller carriers to cooperate and offer alternative services to compete with larger carriers in the market.
In the end, the Commission concluded that a dedicated block exemption regulation is no longer fit for purpose, and that the CBER no longer promotes competition in the shipping sector.
While agreements between companies that restrict competition are generally banned under EU Law and Article 101 TFEU, some agreements may be exempted, provided they meet the conditions of the exemption to the prohibition in Article 101(3) TFEU.
The expiry of the CBER does thus not mean that consortia within liner shipping services cannot exist. It is merely the possibility for such consortia to use a block exemption that will no longer be available, and liner shipping companies wishing to engage in a consortium must instead conduct a self-assessment of whether the consortia are in compliance with article 101 TFEU.
If you have any questions, please contact a member of our EU and Competition Law team.