Policy & Compliance
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The retained CBER, which expires on 25 April 2024, sets out an automatic exemption for certain agreements between liner shipping companies, allowing them to cooperate and provide joint services through ‘consortia’. This includes the joint operation of liner shipping services, capacity adjustments in response to fluctuations in supply and demand, the joint operation or use of port terminals, and certain other ancillary activities. The CBER does not allow liner shipping companies to agree to fix prices, otherwise limit capacity or sales, or allocate markets or customers. The CMA’s review will assess whether the retained CBER meets its intended purpose in order to make a recommendation to government on whether to replace or vary it when it expires. In carrying out its review, the CMA will take account of specific features of the UK economy serving the interests of UK businesses and consumers. It will also consider the possible implications for the retained CBER in light of recent developments in the liner shipping sector, including the impact of global supply chain difficulties. Judgment call The CMA has to determine whether the block exemption remains fit for purpose producing efficiencies for carriers, and lower prices and a better quality of service for consumers. Many argue that given market consolidation, the containerised carriers accrue all the benefits from their trade, certainly in relation to economies of scale and efficiencies. Many forwarders and shippers argue that the system is too tilted in favour of the lines; this has been demonstrated by recent events where there have been record high rates, which have coincided with the lowest ever recorded vessel reliability schedules. The CMA expects to consult on its proposed recommendation in 2023 and that the review process will be similar to that of previously reviewed retained block exemptions. BIFA has noted that in Europe, the Commission has directly approached a number of supply chain participants with a detailed questionnaire to establish their recent experiences of the maritime container industry. It is believed that details of the consultation will be posted on the CMA’s website later in 2022, in accordance with the Competition Act 1998. The CMA is responsible for advising the Secretary of State for Business, Energy and Industrial Strategy on varying or revoking retained block exemption regulations, or replacing them with UK legislation when they expire. It is anticipated that the CMA will ask for detailed information regarding rate fluctuations, service reliability and if there were and still are cases where independent freight forwarders believed themselves disadvantaged compared with a carrier’s ‘in-house’ forwarder. Having reviewed the long and complex European Questionnaire, there are some interesting questions asking for comparisons and/or contrasts between those carriers operating in an alliance/consortia and those who have remained independent. The complexity of this review of the CBER should not be under-estimated and BIFA will be encouraging Members engaged in container shipping to respond to the questionnaire from the CMA.
regulators have monitored market conditions. It is noteworthy that within a relatively short timeframe both the European Commission and CMA have announced reviews of the Container Shipping Block Exemption Regulation. The CMA is reviewing the retained Liner Shipping Consortia Block Exemption Regulation (CBER) to inform its recommendation to government on whether to replace it. The Competition Act 1998 prohibits agreements between businesses that restrict competition in the UK unless they meet the conditions for exemption in section 9(1) of the Competition Act or are otherwise excluded. This is known as the Chapter I prohibition. Legal certainty An agreement is exempt from the Chapter I prohibition if it creates sufficient efficiencies and benefits to outweigh any anti-competitive effects. A ‘block exemption’ regulation automatically exempts agreements of a certain category from the Chapter I prohibition if the agreement satisfies the conditions set out in the regulation. In this way, a ‘block exemption’ provides legal certainty for businesses. Following the UK’s exit from the EU, the EU block exemption regulations that were in force under EU law at the end of the Transition Period on 31 December 2020 were retained in UK law.
The complexity of this review of the CBER should not be under- estimated and BIFA will be encouraging Members engaged in container shipping to respond to the questionnaire from the CMA
October 2022
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