Visit Our Sponsors
Hot on the heels of the abolition of liner shipping conferences in Europe on October 18, container lines face another major regulatory challenge--a planned revision of EU (European Union) competition law with respect to joint (consortia) services between carriers. Ocean carriers see those intended changes to the exemptions from EU competition law to which they are currently entitled (due to come into effect in April 2010) as potentially very restrictive to their operations.
Speaking at a European Shippers' Council Forum in Oslo, Norway, last week, Chris Bourne, Executive Director of the European Liner Affairs Association (ELAA), the trade body representing ocean container carriers in Europe, explained: "The EC's (European Commission) Directorate of Competition (DG Comp) is reviewing the Block Exemption Regulation (BER), (which) currently defines how liner consortia operate within EU competition law."
Bourne added that the new draft BER looked very different to the existing one and DG Comp had allowed the shipping industry only one month's consultation period. That was clearly insufficient time for the extensive discussions on the changes required between ocean carriers and shippers, he argued. Furthermore, pointed out Bourne, that deadline was unnecessary, considering that the planned implementation date was not until 2010.
Referring to carrier consortia and alliances, Bourne asserted: "The lines will not stand idly by in such difficult commercial times and see the most effective tool for reducing shipping costs for all, be rendered impotent."
The ELAA has expressed three main objections to the planned BER revision, the first two of which risk putting carriers in contravention of EU competition law. The first centers on the fact that the draft BER treats each consortium as a single entity, assuming that participating carriers do not compete against one another for shippers' business. The ELAA retorted: "All in the shipping business know that lines within the same consortium compete with each other on rate, as well as service levels, despite the fact they share vessels. Such internal competition between consortium members has been recognized by the Commission in the past and that competition is expected to be even more intense, not less, with the demise of conferences."
Second, the ELAA says it objects to the draft BER requiring the aggregation of market shares of multiple consortia with inter-linked membership. It stated: "The way the draft is worded, it is open to broad interpretation, with third party slot charter arrangements possibly deemed part of consortia as well. This makes the 30% market share threshold (currently permitted) totally unrealistic. Many consortia will fall outside the block exemption and face individual assessment based on the assumption that lines in consortia do not compete."
Third, the ELAA maintains that so-called 'lock-in' periods, within which shipping lines guarantee their membership of consortia and which also allow sufficient time for large-scale investment in vessels, are too short, and have not been adapted to account for developments since the current block exemption was approved in 2000.
The organization stated: "Vessels have increased considerably in size and cost, and it therefore takes much longer to recoup the investment made in them. 'Lock-in' periods of an appropriate length, however, would provide much needed stability to do so."
It remains to be seen whether DG Comp will extend the consulting period before implementing the BER revision and whether the planned new rules will be changed again to make them more acceptable to ocean carriers.
Timely, incisive articles delivered directly to your inbox.