BER, or no BER? That is the question

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| The European | 5th March 2019
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The general EU legislation forbids parties to get into consortia as it violates competition on the market. The maritime sector is the only area where consortia, under certain conditions stipulated in the Consortia Block Exemption Regulation (the BER), are still allowed. Shipping lines form consortia to provide shippers their clients, the owners of cargo with better services. Do shippers really get the quality? The European Commission is reviewing whether the BER, enforced in 1995, is still relevant. In the view of European Shippers’ Council, the present legislation has not contributed to better services.

The European Shippers’ Council represents the interests of more than 75,000 cargo owners in the European Union. Transport for these companies is an indispensable link to their customers.

Impact of Block Exemption Regulation on market operations:

The Consortia BER, since its first adoption in 1995, aimed to bring benefits that would be shared between consortia and their clients a better productivity, a higher efficiency, and service improvements. However, 24 years later, the market is not performing properly. The legislation has resulted in a significant competition concentration and service uniformity on main trade lanes to and from Europe.

The current market situation suffers from poor quality services: blank sailings, schedule unreliability, and a weak incidents management, as evidenced by the publicly available statistics. Plus, surcharges are frequently used as an instrument to cover additional costs or get around agreed contractual conditions. According to ESC, surcharges should cover only unexpected situations like the raise of fuel costs.

Looking at the three big alliances that are exempt from the application of the standard EU competition law, it is questionable whether the BER has achieved its goal. However, this apparent failure cannot be fully quantified and opposed to them, as their objectives in terms of efficiency have never been transparent either to stakeholders, or to competition authority, and the monitoring of their efficiency performance is not done.

The data about the service performance (punctuality, reliability, and freight rates) provided by the industry or by neutral third parties may give a good snapshot of some of the market conditions. However, the data is neither precise nor consistent enough to mark prospective trends. This leaves shippers, together with the other stakeholders, with no possibility to check whether the customers of the shipping lines have access to the benefits that the BER should bring to the market.

A lack of dialogue between the parties, the scarcity of shared information, and different approaches of the parties make it difficult to make a thorough analysis of the market situation. Carriers report a lack of demand from customers and for tailor-made and non-commodity types of service. As for the end customers, they perceive a lack of service differentiation and a low-quality operation with no signs of improvement.

The absence of proper communication between consortia and the rest of the stakeholders makes it impossible to take corrective actions. Shippers looking into the heart of the problem are urgently searching for transparency tools to build trust. This is essential.

In addition, the present BER brings an unbalanced legal treatment of the status of the alliances on the one side and of their customers and other stakeholders on the other side. This unbalanced legal status, adding to the above mentioned lack of transparency, puts shippers and other stakeholders in a weaker situation to defend their interests and to trigger corrective actions.

The current BER revision encounters two distant positions those supporting the BER prolongation and those asking for the regulation repeal. Unless a revised regulatory framework clarifying the current BER is adopted, the European Shippers’ Council asks for the Consortia BER repeal.

European Shippers’ Council advocacy for change and improvement

If an amended BER is to be considered, ESC advocates a better definition of the exemption criteria and the introduction of obligations for consortia with a significant market power.

The present BER criteria identifying the consortia that can be exempt from the EU competition law are neither well defined, nor measurable. This may have accommodated the setting up of very large consortia. ESC acknowledges the importance of the benefits of the BER for smaller consortia but calls for clarification of the status of larger consortia regarding the measurement of the market share and relevant markets definition.

Large alliances have a significantly greater impact on the market than the smaller ones. The regulation should identify such powerful consortia and provide measures against market concentration. For this, obligations in terms of quality and reporting for compliance should be applied to consortia with a significant market power.

ESC recommends the replacement of the existing BER with a new BER that would include verifiable provisions and mechanisms ensuring the transfer of benefits arising from consortia operations to shippers and other stakeholders. If all these conditions are not met, ESC prefers the BER to be completely discontinued.

Further information:

europeanshippers.eu

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