Container carriers are set to lose a special European Union antitrust exemption for alliances to lower cargo costs, in a shift the industry complained would create uncertainty for firms that move most of the $25 trillion in annual goods trade.
(Bloomberg) — Container carriers are set to lose a special European Union antitrust exemption for alliances to lower cargo costs, in a shift the industry complained would create uncertainty for firms that move most of the $25 trillion in annual goods trade.
The EU won’t extend the Consortia Block Exemption Regulation when it expires April 25 next year, the European Commission said on Tuesday. Shares of European container lines declined as the announcement meant the companies will face a new legal framework to share vessel space.
The Brussels-based regulator said the move doesn’t mean alliances will be banned, just that general EU antitrust exemptions are “well suited” to the industry.
“The commission does not put into question the potential benefits of cooperation between carriers to jointly operate liner shipping services,” the EU’s antitrust arm said in a statement. “Nor has the commission changed its mind that consortia may be an efficient way for providing and improving liner shipping services that also benefits customers.”
The World Shipping Council said members, which include container carriers, appreciated the commission’s recognition of the benefits of vessel-sharing agreements “even if we disagree with the logic behind the decision to discontinue the CBER.”
“The shift to general EU antitrust rules will create a period of uncertainty as carriers adjust to the new legal structure,” said John Butler, the group’s president and chief executive officer. “Nevertheless, vessel sharing agreements will remain a fully legal and supported way for carriers to ensure efficient and sustainable transport for Europe.”
Shipping lines have formed large alliances over the past decade to better utilize space on vessels and to help mitigate swings in a very cyclical industry. Critics argue these arrangements create an oligopoly-like market where most of the industry’s capacity is controlled by a handful of big players.
The commission said on Tuesday it’s ending the dispensation because it brought limited savings for those participating in consortia and played a secondary role in the carriers’ decision to cooperate.
The decision follows a review started last year when the commission asked for feedback from shipping supply chain firms on the impact of the exemption. During the pandemic and in the immediate aftermath when demand for consumer goods surged, freight rates spiked many-fold, which raised questions about antitrust issues in the industry.
“We believe the news reflects the post-pandemic windfall earnings in the sector and that it will see limited support from competition authorities in the future,” Jorgen Lian, an analyst at DNB Markets, said in a note to clients.
Still, the world’s two largest container lines, A.P. Moller-Maersk A/S and Mediterranean Shipping Co., earlier this year said they plan to end their alliance on their own in 2025 because their strategies had diverted. Other container lines, including Hapag-Lloyd AG, have said they planned to stick to their consortia.
The world’s nine largest shipping lines are grouped in three alliances. Between them, they control more than 80% of the global container vessel capacity, but in practical terms they allocate less than half of their ships to their alliances, according to industry consultant Alphaliner.
–With assistance from Brendan Murray.
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