News / UK government considers its own liner consortia regulations

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The UK government could set up its own Consortia Block Exemption Regulation (CBER) for shipping when it revokes all EU laws.

Jacob Rees-Mogg, secretary for business, energy and industrial strategy, has proposed a Retained EU Law (Revocation and Reform) Bill, which aims to scrap all existing EU law retained in the UK, including the CBER, which the European Commission is currently reviewing.

A consultation paper by the UK’s Competition and Markets Authority (CMA), released on 19 January, is asking for industry views on a UK shipping line alliance regulation, a consultation process due to end on 23 February.

It says: “The CMA’s proposed recommendation to the secretary of state is to replace the CBER, when it expires on 25 April 2024, with a Liner Shipping Consortia Block Exemption Order (CBEO) tailored to the needs of businesses operating in the UK and UK consumers.”

The CMA added it recommended a similar version of the existing CBER, in order to ensure the continuity of container shipping for UK businesses.

It said: “Certain stakeholders have proposed that, without an internationally consistent approach (particularly if the retained CBER was allowed to expire without replacement), liners may be deterred from making direct calls to UK ports in favour of serving the UK by way of transhipment to and from European ports.”

And the CMA is concerned that shipping costs for UK consumers could rise considerably without a regulation aligned to the substantially larger market on the European mainland.

According to the CMA, the total capacity using UK ports was 412,830 teu in September of last year, with 70% of that capacity operating under consortia agreements.

Freight forwarder’s association Clecat, however, said it was disappointed the CMA had proposed keeping provisions of the EU’s CBER for the UK.

Director general Nicolette van der Jagt told The Loadstar: “The need for consistency with Europe, for fear that vessels cease to call at UK ports, is noted. This is something I can understand from the UK perspective, and there are ongoing uncertainties as long as the EU has not made up its mind.”

Moreover, Ms van der Jagt said she was unimpressed with the CMA’s view that block exemptions allow officials to “regulate and forget”, with the CMA arguing that it “does not need to spend time scrutinising what are essentially benign agreements”.

Clecat has made its opinions known to both the CMA and EC. They are:

• the CBER should not be retained, as it has failed on the first condition for renewal of fair distribution of benefits to customers. The retained CBER disproportionately benefits alliance members which already enjoy strong market positions;
• there are concerns around data exchange and liners’ access to commercially sensitive information at different levels of the supply chain as a result of vertical integration;
• the purpose of the CBER is to provide legal certainty that shipping lines co-operating in consortia will not be investigated under general competition rules. However, it provides excessive scope for unintended co-operations, far beyond that necessary for the operation of vessel-sharing agreements. Legal certainty could be achieved through other mechanisms such as general antitrust provisions and/or sector-specific regulation or guidance of some form;
• while the price of services provided by liners increased significantly during the course of the pandemic, the quality of service decreased and higher market concentration in the sector has increased the bargaining power of liners, resulting in more limited and poorer quality services at higher prices;
• connectivity has decreased in recent years, leading to more transhipment, which has negatively affected service quality and final prices. Carriers have reduced direct calls at UK ports, leading to more transhipment from Europe, thereby increasing emissions within the supply chain;
• the current market share provisions of the CBER regime are inadequate and do not contribute to legal certainty, given the apparent number of consortia agreements that exceed the current combined market threshold – the 30% market share threshold is routinely breached;
• VSAs do, in theory, offer efficiencies, and carriers are able to cooperate without a block exemption from general competition rules.