Shipowners welcome EU's five-year extension of consortia
THE World Shipping Council (WSC), the European Community Shipowners' Associations (ECSA) and the International Chamber of Shipping and ICS, have welcomed the EU's extension of consortium exemption for another five years until April 2020.
The move comes as consortia regulation No 906/2009 is to expire in April 2015.
The Global Shippers' Forum (GSF), on the other hand, is calling for a repeal of the European block exemption that allows greater scope for operational alliances in which the ships are run in united ship management system, but function independently in sales and customer service.
According to the shipowners, legal certainty means that consortia arrangements, or amendments to those arrangements (including terminating those arrangements and entering into different ones), can be evaluated solely on operational merits.
European competition authorities have favoured consortia that share vessels to reduce costs rather than joint pricing, unlike conferences which set freight rates together.
Besides, shipper groups have argued that the block exemption for liner shipping due to expire in 2015 is no longer relevant because of the size of mega alliances like the P3 which fall outside of normal competition laws.
The GSF, which incorporated itself to become closer to intergovernmental bodies such as UN agencies, has been in conflict with the European Shippers Council (ESC) and the Asia Shippers Council (ASC) over container weigh-ins. The ASC quit the GSF more than a year ago because it said the body would have diluted its vote by allowing in smaller regional councils.
The GSF said in a statement that its recommendation to the European Commission (EC) was meant "to ensure that there will no longer be any special treatment of the maritime sector under EU competition law" to allow the maritime industry to be treated the same as other sectors.
At present, a liner shipping consortium has a block exemption from European Union competition laws provided its market share is less than 35 per cent. A larger alliance is not necessarily unlawful, but members must conduct a self-assessment to ensure there is no abuse of its dominant position.
Said GSF secretary general Chris Welsh: "As it is now well established what the acceptable parameters of consortia agreements should be, there is no longer any obvious need for a BER 'safe harbour' as self-assessment is quite sufficient for standard consortia agreements."
Accordingly, the GSF said the merits of standard consortia agreements will continue to exist in the absence of any block exemption regulation since self-assessment arrangements under the Horizontal Competition Guidelines will cover good agreements that genuinely confer benefits to shippers through reduced costs, lower rates and extended and enhanced services.
Both the proposed P3 Alliance between Maersk, CMA GM and MSC and the expanded G6 alliance would exceed the 35 per cent limit on key trade lanes.
"GSF strongly believes that the P3 Global Alliance Agreement shows that carriers do not need the consortia block exemption to plan their cooperation," said Mr Welsh.
Some lawyers, who argue that the rules should be renewed, have demanded that the 35 per cent threshold be increased to bring it into line with other jurisdictions where up to 50 per cent market share is permitted.
Moreover, the shipowner groups agree with Brussels that the rules "have not substantially changed" and modifications have been made to the rules of consortia.
Any changes to this legal framework should be avoided to prevent compliance costs to operators in the industry, said the EC, reported Lloyd's List.
Improvements in consortia are found in productivity and "frequency of sailings and port calls, or an improvement in scheduling as well as better quality and personalised services through the use of more modern vessels and other equipment, including port facilities," said the EC.
The WSC, ESCA and ICS agree that the basis of the consortia block exemption since 1995 has remained largely unchanged with no regulatory barriers to carriers entering the market.
But issues of overcapacity causing high capital and operating costs have made it very challenging for vessel operators in a highly competitive environment, but "a favourable one for the European importers and exporters that use the services of those vessel operators."
