20 November 2023 (Lloyd's List) - THE UK Competition and Markets Authority has had a change of heart over its support for a consortia block exemption following Europe’s decision to let the Consortia Block Exemption Regulation expire.
The CBER, which was retained in UK law following the UK’s withdrawal from the European Union, allows vessel-sharing agreements between container lines operating in consortia if certain conditions are met, and provides a legal framework of certainty under competition laws.
But with the European Commission reviewing the original CBER, which is due to expire next year, the UK began its own review last August.
In a consultation document published in January, the CMA was initially proposed recommending that the secretary of state replace the retained CBER with a Liner Shipping Consortia Block Exemption Order.
The CMA’s proposed recommendation was to replace the retained CBER when it expired in 2024 with a “broadly similar” exemption order, while making some amendments to improve the block exemption and provide clarity.
Since then, however, the European Commission has decided that the CBER no longer promotes competition in the shipping sector and therefore it will let it expire on April 25, 2024.
Carrier interests had hoped to keep a separate UK exemption alive, and had lobbied the government to not follow the EU example.
The World Shipping Council and the Asian Shipowners Association argued that the EU’s decision to end its exemption was based on reasoning that was “deeply flawed and incoherent” and its findings were “unsound”.
The UK Chamber of Shipping also supported retaining the exemption, saying it provided legal certainty and delivered operational efficiencies that benefited carriers, their customers and consumers.
Nevertheless, this appears to have fallen on deaf ears at the CMA. Although its consultation runs for another month, it has published an initial recommendation to allow for further input.
“Following this consultation, and in light of further assessment conducted by the CMA, the CMA no longer proposes to recommend replacement of the retained CBER,” the CMA said in a statement on Friday.
“The CMA’s provisional view is that that the retained CBER should lapse on its expiry date of April 25, 2024, without replacement.”
In its provisional decision, the authority said it recognised in principle that consortia could enable carriers to achieve certain economies of scale, resulting in efficiencies.
“However, based on the evidence received by the CMA, the CMA no longer has sufficient certainty that consortia covered by the Retained CBER will produce efficiencies which outweigh their potential impact on competition,” it said.
For a Retained CBER to apply, the cumulative market share of the liners participating in the consortia must not exceed 30%. But the CMA said it had evidence that a large proportion of consortia already exceeded that threshold and would therefore not benefit.
“Liners participating in consortia which exceed the market share threshold would be subject to the ordinary provisions of competition law,” it said.
“Even on the interpretation of the Retained CBER advanced by the liners, it is clear that a large number of consortia already operate above the market share threshold established in the Retained CBER, and therefore require self-assessment.”
In assessing the EU’s decision to drop the CBER, the CMA concluded that it was unlikely to have a material effect on carrier calls to the EU.
“Based on liners continuing to operate routes calling at both EU and UK ports, the CMA has considered whether a UK Consortia Block Exemption Order would materially reduce any burdens associated with competition law compliance,” it said. “The CMA concludes that this is unlikely.”
Initial reactions from the shipper community have been favourable.
“We are pleased that the CMA has effectively reversed that decision and reached the same conclusion as the European Commission,” said British International Freight Association director-general Steve Parker.
“If it becomes a final decision, it will be a sensible conclusion to the ongoing container market public consultation that has been conducted by the CMA since the start of this year.”
