Shippers cry foul as competition regulators ignore consortia
Measures used to calculate the concentration and market shares of shipping lines fail to take ...
A global initiative to investigate liner shipping in the wake of the pandemic has been established by the so-called Five Eyes group, which does not include the EC – to the anger of European freight forwarders.
The forwarders have increased the pressure on the EC to investigate some of the latest practices of shipping lines, which they believe are anti-competitive and an abuse of their dominant position.
Forwarders’ representative Clecat wrote to the EC again last week, following their earlier efforts, with the Global Shippers’ Forum among others, to get the EC to investigate major price escalations and other carrier practices forwarders claim are hindering their businesses, or worse, putting them out of business altogether.
Today, Clecat director general Nicolette van der Jagt told The Loadstar: “We urge [EC commissioner] Mrs Vestager to also investigate the four biggest EU owned container lines, MSC, Maersk, CMA CGM and Hapag Lloyd. I wonder whether the Anglo-Saxon countries trust her to protect the economy of the EU and its partners which have been so badly damaged by inflation and the cost of living.”
In contrast to the EC approach, regulators in the US, UK, Australia, New Zealand and Canada have come together to launch a global investigation into a liner industry which made historically high profits last year and is on course to rake in similar amounts this year.
“Temporary supply chain disruptions should not be allowed to conceal illegal conduct,” said assistant attorney general Jonathan Kanter of the US Justice Department’s antitrust division. “The antitrust division will not allow companies to collude in order to overcharge consumers under the guise of supply chain disruptions.”
The Five Eyes approach is in stark contrast to Europe, which has seemingly declined to be involved.
An EC spokesperson told The Loadstar: “The commission is closely monitoring the container shipping industry and is aware that there have been, in particular, large price increases in the sector over the recent year on routes to and from the EU as well in other parts of the world.”
A particular target for forwarders and shippers alike has been the Consortia Block Exemption Regulation (CBER), which allows “agreements between maritime shipping companies to cooperate in ‘consortia’, ie in the provision of regular and scheduled international maritime shipping services”.
The CBER is due to expire in 2024. However, the EC said: “Before it expires, the commission will evaluate its impact and relevance in order to determine whether it should be prolonged and, if so, under which conditions. In the context of the evaluation, all interested parties will be invited to submit their comments on the draft rules.”
In response to the Five Eyes initiative, Ms van der Jagt said: “We find this a timely and welcome announcement of competition authorities that share the concerns we expressed last week in a 12-page letter of complaint to commissioner Vestager.”
She added: “The authorities include the most active enforcement authorities in the world (apart from the EU) the group of cartel busters no longer have significant commercial interests in national container liner shipping companies but are amongst the worst hit victims of the collusion on capacity and price hikes on the back of the pandemic.”
Small and medium-sized European forwarders are exasperated with the methods employed by the carriers, with some claiming that their very livelihoods are at risk fromwhat the forwarders claim are underhand tactics.
One southern European forwarder wrote to The Loadstar: “All the shipping lines are charging an additional fee called lo-lo, in case you arrange the inland haulage directly with the trucking company instead of using their service.”
The Loadstar has seen a document from MSC to a forwarder, effectively charging €31 ($35) to not provide a trucking service. The lo-lo charge is waived if line haulage is used.
And a north European forwarder told The Loadstar lines were “imposing carrier haulage”, forcing the company to use spot rates rather than offering contracts.
It said: “It is an effective denial of service, in our case Maersk or Hamburg Süd both refuse to take our calls. But as I travel across Europe, I see forwarders being treated differently, never mind how big or small you are. Some small firms still get rates and allocations from Maersk in Turkey for instance…but no longer in France. Why? No idea.”
The southern forwarder said the carriers were apparently “exchanging information about exporters/importers, volumes, pol, pod, target price etc and, of course, this is not correct, as any shipping line should apply its own strategy instead of taking agreements between each other, controlling the market.”
The forwarder also believes the vertical integration seen with some of the major lines is distorting the market.
“If we both go to the same client and MSC is giving you $10,000/40ft and to me $14,000, can you tell me how can I get the customer? It doesn’t make any sense to offer such a different rate that will never give me the opportunity to win.”
Shipping lines are adamant that there is no wrongdoing and their practices in the market are legal, but they blame inland infrastructure for major congestion that has seen rates soar.
World Shipping Council president and CEO John Butler said: “Shippers are frustrated with the current market situation, as are carriers. The supply chain congestion is due to pandemic-induced extreme demand coupled with operational disruptions as manufacturers have closed plants, and ports and inland logistics are overloaded, tying up capacity and reducing supply. This demand-supply imbalance is what has driven-up rates.
“Over most of the past 20 years, the container market has been operating with overcapacity and shippers have had high access to cheap ocean transport, being able to book on short notice at low cost. They are understandably frustrated that this is no longer the case, but there is no logic or evidence in jumping to the conclusion that this is somehow because of illegal behaviour.”
Nevertheless, forwarders want to see some regulatory action.