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Shipping lobbyists in frantic spurt to prevent BER extension

European Competition Commissioner Margrethe Vestager will soon make a decision on a matter that will undoubtedly disappoint many in the shipping industry. It concerns a yes or no to an exemption rule that allows competitors like Maersk and MSC to collaborate.

Kenzo Tribouillard/AFP/Ritzau Scanpix
European Competition Commissioner Margrethe Vestager will soon make a final decision on the container industry's special provision, the Block Exemption Rule. Photo: Kenzo Tribouillard/AFP/Ritzau Scanpix

In the coming weeks, the EU's competition commissioner Margrethe Vestager will either give a thumbs up or down to the highly disputed special provision, Block Exemption Regulation (BER), which, somewhat unusually, allows competing container shipping companies like, for example, Maersk and MSC to collaborate.

The scheme, which is due for renewal by the end of March, allows container liners to coordinate their networks and utilize slots on each others' vessels if the have a market share of less than 30 percent.

If this is the case, the liner companies do not need permission from the European Commission, but are only dependent on the EU reassessing the scheme every five years to determine whether it works and ensure that it does not harm competition.

GSF believes the Consortia Block Exemption to be life-expired and that it should be replaced by more specific and flexible rules.

Global Shippers Forum

Until now, the EU has not seen any problem in this and the scheme is therefore still in effect. In fact, Vestager was the one who re-approved it back in 2015.

In other words, Vestager needs to have found arguments that convince her of the opposite to persuade her to curb the extraordinary exemption rule, which is unique to the container industry. And nothing seems to indicate that this has happened.

Therefore, a number of industry associations within transport, logistics and ports are currently hard at work trying to convince the commissioner to change her mind. As recently as yesterday, the organizations that represent freight forwarders, Clecat, port representatives, Feport and the shippers in GSF voiced criticism aimed at getting the attention of the Competition Commission.

Organizations criticize EU on issue of container consortia block exemption

In its simplicity, they believe that the European Commission is listening to the liner companies while it ignores, or at least listens very little to, the customers.

And they may have a point, if you look at the commission's position so far.

Price and service

Price may be the most important argument for container shipping companies not abusing their position. And this despite the fact that since 2015 the number of shipping companies have dropped, meaning the remaining companies have become larger and concentrated in three major global alliances.

But the price of transporting a container from A to B remains low, assesses the European Commission. And looking at the major container liners' fiscal reports, nothing seems to indicate that things are going swimmingly, which could imply that the shipping companies were using the option for collaboration to overcharge.

Things are not as clear when it comes to service. Because as the most recent figures for punctuality among the big liner companies show, they will need to improve significantly in order to claim that they are on time. More than one in five are delayed by more than a day, and average delays increased last year, showed figures from Seaintelligence Consulting the other day.

On the other hand, shipping companies have improved much since 2018, seven percentage points to be exact, and they also boast of more product offerings that customers enjoy. Some of these include new digital ways of interacting with the shipping companies, as well as more direct port calls.

The market conditions of the liner-shipping sector still appear to necessitate the existence of a sector-specific BER.

The European Commission

In the recommendation developed by the group of officials who have worked with the case since 2018, it is even mentioned that it is necessary to preserve the rule exemption:

"Overall, the evaluation indicates that the market conditions of the liner-shipping sector still appear to necessitate the existence of a sector-specific BER. Therefore, it is proposed that the Consortia BER application period should be prolonged," wrote the Commission in the document from November last year.

Only extended by four years

Conversely, the report suggests only extending the exemption by four years compared to the previous five, which, according to ShippingWatch's information is due to the commission acknowledging that shipping changes at a rapid pace. They therefore want to reassess the scheme in 2024 again, and thus the next hearing process begins in 2022.

Shippers criticize EU's extension of container block exemption

Customers, however, believe this solution is way too rigid and that the European Commission should introduce a more flexible model, where they actively monitor how the regulations impact customers, while also making it easier to complain about the container shipping companies.

Today, shippers and other affected industry organizations claim it is very difficult to prove a complaint about "misuse of market dominance" once the scheme is approved. In fact, it is only during the hearing period, which does not begin until a couple of years into the scheme's run-time, that the scheme can be discussed.

"After 10 years, GSF believes the Consortia Block Exemption to be life-expired and that it should be replaced by more specific and flexible rules that take much greater account of shippers’ and other users’ interests. The Commission needs to remember that the users of Consortia services are in fact European businesses and their customers and suppliers around the world, importing and exporting goods to and from the EU," writes GSF in a notice in January.

Once Vestager has made a decision, it will enter force from April 1 as it is not a political process that first needs to be negotiated and passed by a majority before it can take effect.

English Edit: Ida Jacobsen

EU Commission will extend block exemption regulation for container shipping

EU Commissioner hopes for extension of container block exemption

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