Chuah, J.

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     University of Westminster Eprints http://eprints.wmin.ac.uk   Extension of liner shipping consortia block exemption.  Jason Chuah  School of Law     This is an electronic version of an article published in the Journal of International Maritime Law, 11 (2). pp. 154-155, 2005.       The Eprints service at the University of Westminster aims to make the research output of the University available to a wider audience.  Copyright and Moral Rights remain with the authors and/or copyright owners. Users are permitted to download and/or print one copy for non-commercial private study or research.  Further distribution and any use of material from within this archive for profit-making enterprises or for commercial gain is strictly forbidden.        Whilst further distribution of specific materials from within this archive is forbidden, you may freely distribute the URL of the University of Westminster Eprints (http://eprints.wmin.ac.uk).   In case of abuse or copyright appearing without permission e-mail wattsn@wmin.ac.uk. INTERNATIONALANDREGIONALORGANISATIONSREVIEWANDANALYSISEUROPEAN UNIONSpecialist Editors: Dr Vincent J G Power, Jason ChuahEXTENSION OF THE LINER SHIPPING CONSORTIA BLOCK EXEMPTIONJason ChuahOn 25 April 2005, the Commission issued a press release stating that the Block Exemption for LinerShipping Consortia (Regulation 823/2000) has been extended until 25 April 2010. The blockexemption was adopted in 1995 and was subsequently renewed in 2000. Under the blockexemption, all agreements with the object of promoting and facilitating joint operations of linershipping services were exempted from the application of Article 81 of the EU Treaty. Article 81, asmight be recalled, prohibits anti-competitive commercial practices. The block exemption wasdeemed necessary because, as the Preamble to Regulation 823/2000 states:consortia . . . generallyhelp to improve theproductivity andqualityof available liner shipping servicesbyreason of the rationalization they bring to the activities of member companies and through theeconomy of scale they allow in the operation of vessels and utilization of port facilities.It is also the reasoning of the regulation that consortia help to promote technical and economicprogress by facilitating and encouraging greater utilization of containers and more efficient use ofvessel capacity. It should, however, be remembered that consortia, as defined by the regulation,exclude any agreement or arrangement resulting in price fixing.The block exemption covers liner shipping consortia with a market share of less than 30 per cent. Ifthe consortia operated outside the liner conference context, the threshold was 35 per cent.Underthe original regulation, a consortiumwith a market share above those ceilings but below 50 per centmay still benefit from the block exemption, if the agreement is notified to the Commission and theCommission does notoppose the exemptionwithin sixmonths.Thatwas amendedon12March 2004by Regulation 463/2004 as a result of the new system introduced by the Modernization Regulation1/2003 which abolished the notification system. The amendment provided that any consortiumclaiming the benefit of the block exemption:must be able, on being given a period of notice which the Commission or the Member States'competition authorities shall determine on a case-by-case basis and which shall be not less than onemonth, to demonstrate at the request of the Commission or the Member States' competitionauthorities that the conditions and obligations imposed by [the block exemption] aremet.Another change to the block exemption introduced by Regulation 463/2004 was the provision thatthe Commissionmay withdraw the benefit of the consortia blockexemption, if it finds in a particularor individual case that an agreementormeasure taken by the consortia has certain effectswhich areincompatible with Article 81(3) EC.This is especially the case where, in a given trade, competition154 (2005) 11JIML : EUROPEANUNION : INTERNATIONAL ANDREGIONALORGANISATIONSfrom outside the conference within which the consortium operates or from outside a particularconsortium is not effective.There is also a number of other conditions with which the consortia must comply before becomingexempt from article 81.These include, generally, the existence of effective price and other forms ofcompetitionbetweenmembers of the conferencewithinwhich the consortium operates, the rightofmembers to withdraw from the consortium, the right of members to offer their own individualservice contracts, the right of members to use their own marketing strategies, the need for regularand effective consultations, etc.The renewal of the block exemption retains these conditions with only minor modifications. TheCommission stated that with the current review of the block exemption for liner shippingconferences (Regulation 4056/1986), whichmay lead to substantial re-writing of the law, there is nonecessity tomake substantial changes to the consortia blockexemptionwhich is closely linked to theliner conferences regulation.Onemodification, however, is the extension of the timewithin which amember might withdraw from the consortium. Under the current regulation, a member maywithdraw from the consortiumwithout having to pay a financial penalty after an initial period of 18months from the entry into force of the agreement. That period has now been extended to 24months. In addition, that initial period would apply where the parties to an existing agreement haveagreed to make substantial new investment in the maritime transport services offered by theconsortium. Such investmentwould be considered substantial when it constitutes at least half of thetotal investmentmadeby the consortiummembers. Another change is that the abilityofmembers tooffer confidential independent individual service contracts would be presumptive of pricecompetition in the agreement/measure in question; therebymeeting one of the conditions specifiedin the block exemption.It is obvious that, while the Commission finds it difficult to ignore the strong evidence that consortiaarenecessary andvital for the state of efficient andeconomic shipping services, it is deeplydistrustfulof anybusiness or commercial practicewhich does not fit tidily into itsmodel of optimal competition.Hence, the retention and, indeed, tightening of the conditions in the block exemption.INTERNATIONAL ANDREGIONALORGANISATIONS :EUROPEANUNION : (2005) 11JIML 155

Extension of liner shipping consortia block exemption

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Extension of liner shipping consortia block exemption

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