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Article 81(1) of the EC Treaty prohibits agreements which have as their object or effect the restriction of competition (subject to certain exceptions set out in Article 81(3).

In order to help companies gain some legal certainty as to the effect of this prohibition on their agreement the European Commission have produced a number of block exemption regulations, which set out the terms of “safe harbours”. 

Within the block exemptions parties gain legal certainty that their agreements are not anti-competitive. The TTBER is the regulation covering technology transfer – licensing agreements. The most recent version of the TTBER came into force on 1 May 2004. The text of the regulation can be found here.

The regulation is accompanied by guidelines which explain in more detail the application of the regulation, and how the application of Article 81 for agreements which fall outside the scope of the regulation may be considered by the Commission. The guidelines can be found here.

Please click the button to view our FactSheet and FAQ (Frequently Asked Questions) on the Technology Transfer Block Exemption Regulation.

Supply of cars

Please click the button to view our FactSheet and FAQ (Frequently Asked Questions) on the EC Block Exemption for Cars.

European Commission Discussion Paper on the Future of the IATA Block Exemption (Regulation 1617/93 (EC))  

The IATA (International Air Transport Association) block exemption (to EC Regulation 1617/93), which permits tariff conferences (which fixes certain types of airline prices), is set to expire on 30 June 2005.

This block exemption has been running since 1993. It covers the application of Article 85(3) of the Treaty to certain categories of agreements and concerted practices concerning:

• Joint planning and coordination of schedules;
• Joint operations;
• Consultations on passenger and cargo tariffs on scheduled air services and slot allocation at airports.

The European Commission issued consultation papers in 2004 and 2005, with the implied view that the block exemption restricts competition.

The first paper also suggested that certain agreements and concerted practices under this exemption should be revised or dropped. The second (and latest) paper expanded on last year’s consultation. 

This most recent discussion paper does not expressly set out proposals. However the following number of key main conclusions can be inferred:

• IATA tariff conferences restrict competition;

• Interlining delivers benefits, but these have substantially decreased over time, in particular on routes within the EU;

• These benefits are not sufficient to outweigh the restrictions that arise for routes within the EU, although they are for air transport outside the EU. The tariff conferences therefore do not satisfy the competition conditions of article 81 (3) sufficiently to benefit from a block exemption for routes within the EU, although they do for extra-EU air transport and;

• The Commission requests the views of respondents on whether tariff conferences are indispensable and a posted prices system as an alternative.

The UK government sent a response on 5 April 2005 that broadly supports the Commission position. This is that the block exemption (subject to a transition period) for intra-EU traffic should be removed; and for a new block exemption for EU-third country traffic to be put in place. 

Specifically the government supports the lines that:

• IATA tariff conferences are restrictive of competition;

• The benefits of interlining (where passengers can buy a through ticket for more than one route) do not outweigh the restrictions on competition for air routes within the EU, but they may for outside the EU;

• Posted prices offer a viable alternative to tariff conferences.

The government also believes that the IATA block exemption should be removed for air travel within the EU (with a transitional period of a maximum of 2 years). The exemption for travel between the EU and third countries should be extended for a maximum of 5 years with a review at the end of that period.

Next Steps

When the consultation period has finished, the Commission will make a proposal on the future of the Regulation. The Commission (DG COMP) has said it is committed to discussing with IATA and the airlines any alternative solutions.

European Commission consultation on the renewal of Regulation 823/2000 (the Consortia shipping block exemption).

The Consortia block exemption was first adopted in 1995. It came about as a result of the increased use of very large container ships, which cost in the region of $110 million each to build. Given the large investment required by shipping companies in such container ships, they join together in consortium agreements between two or more companies to provide international liner shipping services.  

The agreements allow them to co-operate in the joint operation of a maritime transport service. This allows them to improve the productivity and quality of the liner shipping service. It also encourages greater utilisation of the containers and the more efficient use of vessel capacity.

The block exemption therefore exempts these consortia agreements from Article 81(1) EC Treaty (the prohibition of agreements that restrict or distort competition).

It is worth noting that these agreements do not fix prices or capacity, unlike those relating to the liner shipping block exemption (see separate webpage entry).

The European Commission proposed renewal of the block exemption (which was due to expire on 25th April 2005) for a further five years until 25th April 2010.

It is also recommended making minor technical amendments to the exemption that:

• Reflected changes in industry practice; and

• Where the current text has proved unclear in its practical application to consortia agreements.

The UK government response agreed that the exemption should be renewed and was content with the proposed technical changes (as were all other EU Member States).

The European Shippers Council view is that consortia are preferable to liner conferences (which fix prices). Their response to the Commission’s consultation last summer was that there remains a justification for the consortia block exemption. The UK Freight Transport Association, when consulted, expressed similar views.

The European Liner Affairs Association (ELAA) also supported the renewal of the consortia block exemption. However ELAA suggested both technical and substantive amendments to the block exemption in their response to the Commission consultation last year.

After due consideration, the Commission declined making substantive amendments at this time before the conclusion of the liner shipping block exemption discussions. The government agreed with this response.  Accordingly, the Commission arranged renewal of the block exemption, with minor amendments, as indicated above – with effect from 25 April 2005.

EC Journal entry
EC Journal Corrigenda

Next Steps

The Commission believe that the text of this block exemption should be reviewed, following the conclusion of negotiations on the liner shipping block exemption (Regulation 4056/86).

The EC Commission review of Regulation 4056/86, applying the EC Competition rules to maritime transport (the liner shipping block exemption).

The liner shipping block exemption (to EC Regulation 4056/86) permits certain categories of agreements between shipping carriers transporting cargo, who are members of liner conferences. Subject to certain conditions and obligations, the block exemption exempts such agreements from the prohibition of anti-competitive agreements in Article 81(1) of the EC Treaty. In particular, it allows shipping carriers to engage in price fixing and supply regulation within liner conferences.

The Commission have been reviewing the block exemption since a 2001 report by the OECD recommended that anti-trust exemptions for liner conferences no longer served their original purpose.

The exemption is open-ended and has no review date.

The Commission have undertaken two consultation exercises (2003 and 2004) with EU member states and stakeholders, with a view to repealing the block exemption. The latter exercise (consisting of a White Paper among member states only) set out the Commission view that the shipping lines had not submitted evidence to justify continuation of the block exemption.

The Commission White Paper did not make a formal proposal. It sought views on the possible repeal of the block exemption and whether another market instrument might replace it.  The Commission also asked for comments on a specific alternative proposal from shipping carriers.

Views on maintaining or repealing the block exemption among the stakeholders have to date been polarised. On the one hand shipping carriers wish to maintain the block exemption. They argue that it helps ensure stability of price and supply. The shippers, who use the services, disagree.

The UK Government response supports the main Commission view (i.e. that the exemption is not justified on competition grounds).

The government considered that:

• There was no justification in competition terms, for retaining the liner shipping block exemption and it should be repealed;

• In principle, it was content that the European Commission (“the Commission”) is considering alternative forms of co-operation that do not involve tariff fixing, provided these aim to maximise competition and provide legal certainty;

• It would be premature to settle on any one suggestion, without thoroughly considering the alternatives;

• The proposals for removal of the provisions relating to technical agreements, conflict of laws and tramp shipping and cabotage were acceptable.

Latest developments

The Commission are preparing a discussion paper reporting on the submissions received, commenting on the White paper; and will publish an impact assessment study later in 2005.

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