EU Block Exemption on Container Shipping

EU law generally bans agreements between companies that restrict competition. However, the maritime Consortia Block Exemption Regulation allows, under certain conditions, shipping lines with a combined market share of below 30% to enter into cooperation agreements to provide joint cargo transport services (known as “consortia”). Container shipping based on liner consortia accounts for most of the non-bulk freight carried by sea to and from Europe. The Consortia Block Exemption Regulation will expire on 25 April 2020. The Commission has therefore launched a consultation seeking to collect views from stakeholders to assist the Commission’s assessment of the impact and relevance of the Consortia Block Exemption Regulation, and to provide evidence for determining whether it should be left to expire or prolonged, and if so, under which conditions.

A recent OECD study confirms that container shipping has become more concentrated and vertically integrated and has slipped on various performance indicators related to trade lanes to and from Europe. Here is a summary of their findings:

  • Until 2015, all alliances taken together had market shares below 50% on the main East-West routes involving Europe. In 2018, this share was above 95% for Asia-Europe services and above 70% for North America-North Europe.
  • The market shares of independent feeder operators have declined: In 2018, there was only one independent feeder operator in the top five for intra-North Europe shipping. In 2006, the first three feeder operators on this market were independent operators.
  • Vertical integration between carriers and terminal operators in Europe has emerged:  Share of carrier-controlled terminal operations has increased from 20% in 2007 to 29% in 2017. The terminal operators with the strongest growth rates over the 2007 to 2016 period were carrier-controlled terminal operators, in particular MSC and Cosco, and non-European terminal operators, such as Yildirim, China Merchants and Dubai Ports World.

Performance has been slipping with regards to:

a) Fleet utilization: ship utilization rates have remained more or less stable over the last years, but there have been intense peaks in ship idling rates recently. These not only took place during the global crisis that started in 2008 and 2009, but also during other periods, from mid-2015 to mid-2017, the period in which the current mega-alliances were formed. One is inclined to conclude, then, that consortia over the last years have not improved fleet utilization but can be associated with high peaks of idle fleets.

b) Direct liner connectivity: Over the last decade, all EU countries but three have faced a decline in direct liner connectivity (the share of countries that can be reached without transshipment).

c) Unique port pairs: The number of direct port-to-port connections on European trade lanes has declined since 2012: from 211 in March 2012 to 189 in September 2018 on the Asia-North Europe trade lane and from 333 in March 2012 to 294 in September 2018 on the Asia-Med trade lane. More than half of the distinct port pairs on trade routes with Europe were offered only by one alliance in September 2018. This means that more than half of the direct port pairs will not meet any competition from carriers outside that one alliance.

d) Weekly service frequency: This has been declining since 2012 on three of four main European trade lanes: Asia-North Europe, Asia-Med and North Europe-North America East Coast. The only exception to this trend is Med-North America East Coast. The largest decline took place on Asia-North Europe from 24 weekly services in July 2012 to 16 services in December 2018.