News / Shipper anger at EC extension to shipping consortia block exemption regulation

© Denys Yelmanov

Shippers have “slammed” the EC’s recent decision to renew the consortia block exemption regulation (CBER) for four years, claiming it ignored the views of exporters and importers.  

The Global Shippers’ Forum (GSF) has also called for more “policing” of shipping line activities. 

Noting “continued poor service levels”,  the GSF said there was a “seeming lack of competitive pressures”. 

“Shippers are well used to similar pooling arrangements in the aviation sector, which allow code-sharing to be established for the same aircraft,” explained secretary general James Hookham.  

“But these seem to be fully compatible with EU competition law, without the need for a block exemption. What is it about the global shipping lines that warrants this form of exceptional treatment under competition law?

“We are not convinced by the commission’s arguments or conclusions.” 

He added: “In our view the commission has missed the opportunity to ask the bigger questions about how the shipping sector got into its current situation of historically low shipping rates and overcapacity on many routes, and whether the continuing exemptions from normal competition rules provided by the BER are the right remedy in the long term. 

 “The commission looks set to prop up the shipping lines for a further four years without fully understanding why. European manufacturers and retailers, together with their customers and suppliers around the world – as the users of container shipping lines – deserve better support and service from their competition authority.” 

The shippers’ anger is supported by evidence from a report published last year by the International Transport Forum (ITF) and the OECD, The Impact of Alliances in Container Shipping, which presents a fairly damning view of container line alliances. 

It noted: “In light of the longer-term trend toward the removal of block exemptions in the shipping industry, the European Commission should carefully consider allowing the EU consortia block exemption regulation to expire in April 2020, as currently scheduled, rather than extending it.

“A repeal of block exemptions is unlikely to result in the termination of current and future alliances, as these could still be authorised under competition law on a case by case basis. However, it would ensure greater scrutiny of individual alliances and thus more effectively deter any anticompetitive conduct in the sector.” 

The report added: “Alliances have contributed to lower service frequencies, fewer direct port-to-port connections, declining schedule reliability and longer waiting times. This has increased total transport times and delivery uncertainty for various shippers, leading to higher inventory and buffer costs. Moreover, alliances have proved to be inherently instable.” 

It also noted “destructive competition” at ports and increased bargaining power, leading to “declining rates for port services, carriers requesting additional public infrastructure and vertical integration by carriers, in particular in terminal operations”. 

However, some observers disagree, arguing that carriers could not offer the services they do, alone. 

In a comment to The Loadstar, Gary Ferrulli, chief executive of Global Logistics & Transport Consulting, warned shippers to be “careful what you wish for”. 

He said: “How many carriers could, on their own, service the major east-west trades? How many have the vessel capacity, on their own, to provide services between Asia and Europe? 

“So what happens when four or five ‘carriers’ of today in those markets no longer service those markets due to the lack of the capacity, and the right capacity, to service the trade? Will things be better or worse?  

“Certainly, fewer carriers to deal with won’t be an advantage to shippers. And even those with the vessels to service the trade will have less capacity, some of the partners will no longer provide some of the vessels they used for capacity. Will that encourage those left to build more ships? Why, to continue to reduce rates and give away profits as they have for the last 10 years?” 

The GSF disagrees however. Mr Hookham added: “We shall be setting out our concerns and arguments in response [to the BER extension], and campaigning for greater policing of shipping lines’ activities.”