The European Commission has been accused by shippers and transport unions of disregarding a public consultation in its decision to renew the carrier exemption from competition laws for another four years without making any changes to the regulation.
Despite an expectation from logistics and shipper organizations that modifications would be made to the consortia block exemption regulation (BER) to reflect structural changes from large-scale consolidation and carriers grouped in three mega alliances, the EC Tuesday renewed the regulation without changes.
That has drawn stinging criticism from the European Transport Workers Federation (ETF), a pan-European trade union that represents more than 5 million transport workers from 200 transport unions across 41 countries.
Terje Samuelsen, chair of the ETF Dockers’ Section, said the EC decision disregards the result of the public consultation in which the ETF delivered a critical view of the way the exemption was granted to carrier consortia and the consequences it had on working conditions.
“We totally disagree with the prolongation of the BER. This is clearly a political decision aimed at defending the interest of only one segment of the maritime sector,” Samuelsen said in a statement. “It is a missed opportunity for the European Commission to take a decision that would have rebalanced the power and fairness within the maritime industry.”
Jordi Espin, policy manager for maritime matters at the European Shippers’ Council, an organization that has strongly opposed continuation of the carrier exemption in its current form, also saw the BER extension as a missed opportunity.
“We are very disappointed. Unfortunately, this regulation has lost the chance — once more — to incorporate a current essential regulation aspect called transparency,” Espin told JOC.com. “On the contrary, it fosters opacity and allows shipping lines to keep on behaving the same way while being deaf to customer requirements.”
The current BER has been extended to April 25, 2024. While European Union antitrust rules prohibit anti-competitive agreements between companies, under the block exemption, carrier alliances can provide joint services without infringing on competition laws.
In its explanation of the decision to renew the BER without change, the EU wrote that the regulation allows carriers to better use vessel capacity and offer more connections, creating efficiencies that resulted in lower prices and better quality of service for consumers.
That was dismissed by Espin, who said there were negative consequences from the BER regulation that directly impacted the real-world maritime operations the EC continues to ignore.
“This four-year extension validates the current maritime supply chain scenario, with all its inefficiencies and problems clearly pictured: blank sailings, less frequencies, and abusive behaviors of some carriers,” he said.
“The list of topics in the BER that require revision is long. We have referred to them many times, especially during the two consultation periods in 2018 and 2019. However, they have not been taken as arguments for regulation improvement but only as customer complaints,” Espin added.
An EC feedback period on the topic, “Cargo shipping – exemption allowing shipping firms to work as consortia (extension),” closed on Jan. 3 and netted 21 submissions, all of which are listed on the EC website. The majority of comments were from customers of container shipping companies — including shippers, terminals, tugboat operators, forwarders, and transport unions — and were against renewing the BER in its current form. The content of the submissions mirrored an earlier call for feedback made in 2018, with carriers firmly in favor of the BER extension, and their customers strongly opposed.
The EC essentially has three main justifications for prolonging the block exemption. First, it believes the BER makes the competition law assessment easier and provides greater legal certainty, thereby reducing risk. It also reduces the costs of competition compliance, and the EC believes that without it, competition rules would become more complex and involve a more detailed self-assessment. A third justification is that the EC regards the BER as being consistent with other EU policies, such as environmental protection and technological developments, while contributing to the global competitiveness of the EU shipping sector.
Unsurprisingly, there was strong support from carriers for extending the BER, especially as far as legal certainty was concerned. Carriers view the BER as a means of providing safe harbor under European Union competition law for vessel sharing agreements, which World Shipping Council president and CEO John Butler called “the backbone” of the global liner shipping network.
“The liner shipping industry has maintained support for the BER because it creates legal certainty for the use of vessel sharing agreements, which are essential operating tools used by carriers to provide customers with better services at lower cost and with improved environmental performance,” Butler said in a statement after the ruling was made Tuesday.
Also welcoming the BER ruling was the Asian Shipowners’ Association, although it questioned why the extension was for four years instead of the usual five-year period as in the past. The BER was renewed for five years in 2010, and for another five years in 2015, and would have expired on April 25, 2020.
One of the main criticisms of the BER was that the EC was focusing too narrowly on the pricing of ocean transport that, according to the Hamburg Port Authority (HPA) submission, did not take into account the interests of major transport stakeholders.
Few countries have a block exemption for shipping. Singapore has extended its BER until Dec. 30, 2020, Hong Kong’s block exemption for shipping extends until August 2022, and Malaysia’s until July 2022. Other countries, such as China, Japan, South Korea, Taiwan, and the United States, have sector-specific legislation instead.