The issue of alliances or vessels sharing agreements in the container shipping sector has arisen once again. The European Union, which views itself as having an important regulatory role in this area of the economy, has stated that it will not extend the legal exemption that enabled container shipping lines to form agreements over capacity sharing. The EU issued a statement on 10th October which said “The European Commission has decided not to extend the EU legal framework which exempts liner shipping consortia from EU antitrust rules (Consortia Block Exemption Regulation or ‘CBER’). The Commission has concluded that the CBER no longer promotes competition in the shipping sector and therefore it will let it expire on 25 April 2024”.

Confusingly however, the EU then suggested that forming alliances may not be illegal, stating “the expiry of the CBER does not mean that cooperation between shipping lines becomes unlawful under EU antitrust rules. Instead, carriers operating to or from the EU will assess the compatibility of their co-operation agreements with EU antitrust rules based on the extensive guidance provided in the Horizontal Block Exemption Regulation and Specialisation Block Exemption Regulation.”

At best this might be interpreted as a move towards making alliances harder to create and operate, but not impossible. One argument in favour of alliances is that there is so much competition in the container shipping market that even the very largest alliance cannot influence the market and the statement from the EU may tacitly admit this by saying that the legality of shipping alliances will be judged on a route-by-route basis. In addition, these rules only apply to shipping lines operating into EU ports, therefore much trans-Pacific and intra-Asian traffic will be presumably, unaffected.

This ending of the Consortia Block Exemption Regulation may have implications for the container shipping market but it’s hard to tell. However, it might be suggested that the shipping lines that will benefit from the reduction of the alliance system will be the largest providers who already have sizeable market-shares. This may be what is behind the dissolution of the alliance between MSC and Maersk. Therefore, a possible scenario for the market after the ending or weakening of the alliance system is that the larger carriers get stronger and the smaller carriers get weaker.

Author: Thomas Cullen

Source: Ti Insights

You must be logged in to post comments