Freight News, Sea

European Shippers urge end to consortia

[ March 14, 2014   //   ]

The European Shippers Council is urging the European Commission not to review the block exemption for liner shipping consortia, in its response to Brussels consultation on the subject. It said that with the changes in economic conditions and because some time has elapsed since the abolition of liner conferences in Europe, the block exemption has fulfilled its purpose, it argues.

Block exemptions are granted by Brussels to consortia and similar groupings allowing exemption from some of its normal competition rules. It was a block exemption that allowed shipping line conferences – as opposed to consortia – to operate until they were abolished in 2008.

The block exemption encourages ship-owners to consider themselves as “special” and does not encourage them to comply with the usual standards of other sectors, argues ESC.

Moreover, there is no good reason to provide exemptions to container ship operators and not to other shipping sub-sectors. The opportunity should not be missed to align the shipping industry with others sectors of the transport market in Europe. “Shipping containers from one end of the world to the other is not as exceptional as it may have been presented and therefore does not require a specific approach from a competition perspective,” says ESC.

In the previous consultation on the subject, in 2009, ESC had supported the renewal of the exemption because ship-owners needed to gradually get acquainted with the general competition rules following abolition of conferences.

Now, though, the ESC is concerned by “recurrent capacity reductions, cancellation of departures and even stop(ped) bookings” which, it says, is perceived as “a manipulation of capacity which is in most cases destabilising logistics systems and clearly influences prices.”

In particular, shippers are unhappy at the unilateral imposition of slow steaming without consultation with the cargo owners, who have not reaped any of the financial benefits from the practice.

In addition, the present Regulation does not address the major concentration on routes between Asia and Europe that may stem from recent announcements, such as the P3 alliance. This may easily lead to an oligopolistic situation in which competition is rendered ineffective. “These alliances are not fully transparent and very few control mechanisms remain possible once implemented. Ship-owners may be able to directly affect prices by cutting capacity.

The combination of large maritime operators in alliances, far from increasing the quality of service (as regularly suggested by the proponents of consortia), in fact reduces it drastically. Direct port calls may also be reduced, leading to longer transit times and more transshipment.

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