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Update: UK competition watchdog calls for liner block exemption to continue

[ January 25, 2023   //   ]

The UK’s Competition and Markets Authority (CMA) has recommended that the Liner Shipping Consortia Block Exemption Regulation (CBER) be replaced by a Liner Shipping Consortia Block Exemption Order (CBEO) tailored to the needs of UK businesses and consumers when it expires on 25 April 2024.

However, the CMA proposes that any CBEO should be broadly similar to the CBER retained from the European Union, to ensure continuity. However, it recommends some amendments to improve the block exemption and provide clarity for the supply chain.

Following the UK’s exit from the EU, the EU block exemption regulations that were in force under EU law at the end of the Transition Period on 31 December 2020 were retained in UK law.

The CMA says that it is “provisionally of the view that a liner shipping consortia block exemption remains a relevant and useful tool for businesses that increases legal certainty compared to a situation where businesses would have to rely solely on self-assessment.”

It says that stakeholders, including some of those more critical of the CBER, have noted the efficiency offered by vessel sharing agreements (VSAs). And while some stakeholders representing shippers and forwarders considered that severe market disruptions including higher freight charges and service delays were directly caused or exacerbated by the retained CBER regime, others consider that they resulted from external shocks.

The CMA says that consortia liner shipping agreements falling below the 30% market share threshold are likely to continue to satisfy UK completion law and that major changes to the existing regulation are not warranted.

However, it adds stakeholders also indicates that certain aspects of the retained CBER regime may need updating or revising, including providing greater clarity on certain key terms and the market share threshold of 30%. Steve Parker, director general the British International Freight Association, while welcoming the launch of a public consultation on the proposed recommendation, said he was “somewhat surprised” that the CMA has issued only one provisional position – the extension of a potentially modified CBER into UK legislation. He hoped that the trade had not been presented with a fait accompli.
BIFA has previously said that its members are extremely concerned that practices undertaken by container shipping lines, as well as easements and exemptions provided to them under competition law, have distorted the market.
While the association is not anti-shipping line, it wants to ensure that there is a suitable balance between carriers and customers, points it made during meetings with the CMA in 2022.
Parker added: “The facts speak for themselves. During a period that has seen EU block exemption regulations carried forward into UK law, there has been huge market consolidation.  “The pandemic highlighted and accelerated this development, and contributed to dreadful service levels and hugely inflated rates, with carriers allocating vessels to the most profitable routes with little regard to the needs of their customers.
“The market conditions have changed significantly since last year when we were pressing for this review. However, the potential for issues resulting from the carrier’s vertical integration of their operations remain.”
BIFA is encouraging its members involved in the deep-sea container market to read the proposal document, and share their responses.

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