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Brussels, 28 th September 2009

Antitrust: Commission adopts new Block Exemption Regulation for liner shipping consortia - frequently asked questions

(see also IP/09/1367 )

What is liner shipping?

Liner shipping involves the transport of cargo, in practice mostly by container, on a regular basis to ports on a particular geographic route, generally known as a "trade". Timetables and sailing dates are advertised in advance and the services are available to any transport user.

What is a consortium?

A consortium is an operational co-operation agreement between two or more liner shipping carriers with a view to providing a joint service on a trade. While a consortium agreement allows its members to share space on the vessels used for the joint service, they market their services individually. Transport users therefore contract directly with the members of a consortium.

What is an EU Block Exemption Regulation?

A Block Exemption Regulation (BER) defines types of agreements which are compatible with EU competition rules provided that the agreements meet the conditions laid down in the Regulation. In the absence of a block exemption, companies must assess themselves whether their agreements are compatible with the EC Treaty's ban on restrictive business practices (Article 81). A Block Exemption Regulation needs to be assessed at regular intervals, in order to determine whether the conditions which originally justified it continue to exist. The Commission has granted a block exemption from the competition rules for liner shipping consortia since 1995 and has renewed the exemption twice since then. The current revision is therefore the third renewal of the block exemption.

Why does the consortia block exemption need to be reviewed?

In view of the expiry of the current Block Exemption Regulation on 25 April 2010, the revision process has two main objectives: first, to take account of the repeal of the liner conference Block Exemption Regulation (Council Regulation 4056/86, to which the consortia block exemption refers) and, secondly to ensure a greater convergence of the new Regulation and other Block Exemption Regulations for horizontal cooperation currently in force, whilst taking into account current market practices in the liner shipping industry.

What are the main changes proposed?

The new Regulation clarifies the definition of a consortium in particular by no longer restricting it to liner shipping transport operated chiefly by container but referring to all liner shipping cargo. The list of exempted activities has been revised in order to better reflect current market practices and to limit the list of exempted activities to what is indispensible for operating a joint service. The market share threshold has been reduced to 30%. The method for calculating the relevant market share has been clarified, i.e. the individual market shares of the consortium members in the relevant market covering all their activities inside or outside the consortium in question shall be taken into account. The exit-clauses and lock-in periods have been adapted to better reflect current market practice while preserving the flexibility of the consortium members. The consultation obligation – which in practice was never used by the industry - has been abolished. The new Regulation also clarifies that in view of the many links between consortia and/or their members operating in the same relevant market, the Commission may withdraw the benefit of the block exemption in case such interlinkages have negative effects on competition and therefore the conditions of Article 81(3) are not met anymore.

Is the renewal of the new Regulation related to the current economic crisis?

The renewal of the Block Exemption Regulation is not related to the current economic crisis. In view of the expiry of the current regulation in April 2010 the revision process already started in 2007. The Block Exemption is prolonged for a further five years and its provisions are not tailored to a particular economic environment.

Do specific competition rules apply to maritime transport?

In 2003 the Commission launched a comprehensive revision of the competition rules that apply to maritime transport. This revision led the Council of the EU to repeal the exemption from EU competition rules for liner shipping conferences in 2006 (Regulation 4056/86, see IP/06/1283 and MEMO/06/344 ). The maritime sector is now subject to the same procedural and substantive rules as all other sectors. To ease the transition to the new regime, the Commission adopted Guidelines on the application of the competition rules to maritime transport services in July 2008 (see IP/08/1063 and MEMO/08/460 ). The review of the consortia block exemption regulation completes the reform of the competition rules that apply to maritime transport services.

Why are there no transition periods in the Block Exemption Regulation?

The new Regulation has been adopted well ahead of its entry into force and the expiry of the current Block Exemption Regulation on 25 April 2010. Operators have sufficient time to review their consortium agreements and adapt them accordingly. The 30% market share threshold provided by the new Regulation already applied to a large number of consortia in the past, as this was the market share threshold applicable to consortia which operated within the former liner conference system.

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