Policy & Compliance
were relatively small. This point was picked up by the CMA, which noted “the cost efficiencies to shipping liners of cooperation through consortia are sufficiently large to outweigh the costs of self-assessment under competition law”. The CMA’s fi nal decision The CMA’s final decision adopts the same framework as its provisional decision. The CMA stated that in order for it to recommend the replacement of the Assimilated CBER with a UK CBEO, two broad conditions should be met. First, there must be sufficient certainty that consortia agreements are likely to meet the conditions of the exemption in Section 9 of the Competition Act 1998 (CA 98) (Condition 1). The CMA stated that, given that the Assimilated CBER “provides an automatic exemption from competition law for a whole category of agreements, it is appropriate for the CMA to require a degree of certainty that consortia covered by the exemption are likely to meet the criteria for Section 9 exemption”. Secondly, there must be sufficient benefits brought by a block exemption compared with self-assessment under Section 9 CA 98 (Condition 2). On Condition 1, the CMA concluded that, based on the evidence it had received, it “no longer has sufficient certainty that consortia covered by the Assimilated CBER will produce efficiencies which outweigh their potential impact on competition”. The following are examples of evidence received by the CMA: • Price - The price of liner shipping services, and profits for liners, increased significantly during the COVID-19 pandemic. Stakeholders representing the users of liners’ services argued that the increases in prices and profits demonstrate that the Assimilated CBER had failed to distribute benefits to customers fairly. However, stakeholders representing liners contended that the price increases were due to other factors, including reductions in liner capacity due to delays at ports and increased fuel costs. • Frequency of services and range of port calls – Stakeholders representing liners’ customers submitted that liner consortia have resulted in reduced sailing schedules and fewer direct connections between ports. Conversely, the associations argued that the reduced sailing schedules and direct connections were due to the COVID-19 pandemic. • Concentration– Concentration has increased significantly in the global liner shipping industry. This has resulted in “an increased likelihood that separate horizontal cooperation agreements may involve participants that are common to multiple agreements”. On Condition 2, the CMA concluded that “creating a new UK CBEO as a sector-specific block exemption would give rise to insufficient benefits compared to a scenario where the consortia agreements that might be exempt under a UK CBEO are assessed according to the ordinary provisions of competition law”. In reaching this conclusion, the CMA had regard to the following factors:
“ The CMA concluded that... it “no longer has sufficient certainty that consortia covered by the Assimilated CBER will produce efficiencies which outweigh their potential impact on competition
Unfortunately, no Member was inclined to respond to the CMA, despite assurances that all responses would be treated as being ‘private and confidential’. BIFA again responded to the consultation on the initial decision and was supported by the International Federation of Freight Forwarders Association (FIATA); at this point one BIFA Member was brave enough to contact the CMA. By this time the Red Sea problems were commencing. The shipping lines did not help their cause by imposing retrospective surcharges on consignments that had already arrived in the UK. Unsurprisingly, respondents were divided along the lines of which sector they represented; BIFA, FIATA and the freight forwarder supported the CMA’s provisional decision not to recommend the replacement of the Assimilated CBER with a UK CBEO. Trade and other trade associations representing shippers took a similar view. Shipping lines and their representatives argued to the contrary. We argued that broader market developments mean that it is more appropriate to evaluate consortia on a case-by-case basis rather than providing for an automatic exemption. Market developments include the diversification of liners into other parts of the logistics market. Some associations argued that the cost of self- assessment compared with overall operational costs
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