The European Union recently announced that the Consortia Block Exemption Regulation(CBER) will terminate when it expires in April 2024. This means that liner intermodal carriers operating European routes no longer enjoy exemptions and are subject to antitrust constraints like other industries. The consequence is that although alliances can continue to operate based on vessel sharing agreements (VSA), shipping companies must review these agreements. At the same time, the EU also has the right to terminate the agreement and impose fines, which brings a lot of uncertainty to the liner alliance.
The liner shipping industry is a capital-intensive industry with relatively high investment costs. In order to reduce costs, shipping companies will adopt previously agreed VSA agreements and form joint ventures. The most mature of this joint venture model is the well-known liner alliance, which operates jointly in multiple groups of routes. The three most well-known liner alliances are the 2M Alliance: MSC and Maersk. THE Alliance: ONE, HMM, Yangming, Hapag-Lloyd. Ocean Alliance: CMA CGM, Evergreen, COSCO Shipping Lines, OOCL. These three major alliances are currently the most well-known liner alliances.
CBER was launched in 2009 and has been extended at subsequent expirations. According to CBER, as long as three conditions are met, the consortium can be exempted from EU antitrust rules. 1. No restrictions on price, transportation capacity, sales terms, market division or customers are allowed. 2. Market share does not exceed 30%. 3. Members have the right to withdraw and the notice period is 6 months. The EU hopes that with everyone’s cooperation, costs can be reduced and effective competition will occur within the industry. The current reason why CBER terminates this agreement is that the EU believes that this agreement no longer meets its original purpose. This agreement ultimately reduced the market share of small and medium-sized companies, while large intermodal operators took a larger share. Therefore, in the end, it did not promote the alliance of small and medium-sized shipping companies. On the contrary, after the merger and acquisition transactions, the liner industry became more and more concentrated. Another influencing factor is whether the liner companies protected the rights and interests of consumers during the Covid-19. This is also the starting point for many groups to strongly demand the termination of CBER. The Covid-19 had not had a completely negative impact before, but since the Covid-2019, high freight rates and very poor services have caused dissatisfaction among shippers. This gives the industry a feeling that the shipping industry does not compete fairly and enjoys many preferential exemptions.
Therefore, after the announcement of the termination of CBER, global shippers strongly agreed. Everyone said that they do not necessarily need to form an alliance, but they need the market to be more transparent. The VSA agreement is still a legal way to ensure efficient and sustainable transportation. Consumers can enjoy lower costs, denser routes, better port coverage, and stronger price competition. At the same time, it is more economical and environmentally friendly for the Alliance to use larger ships. Regardless of whether CBER is used or not, it shows the EU’s attitude towards supervision, which is also a step that must be experienced after the Covid-19. Whether it is CBER or other methods, they have not played their due role. The existence of liner alliances is not the key to supervision, but ultimately changing the industry structure of cyclical excess capacity and using price wars to suppress rivals is the focus of supervision.
