Margrethe Vestager
EC competition commissioner Margaret Vestager

The European Shippers’ Council (ESC) has asked EC competition commissioner Margaret Vestager to abolish general rate increases (GRIs) by shipping lines.

ESC maritime policy manager Fabien Bacquelin told The Loadstar: “In our opinion, there should not be any price announcement. The other characteristics, spot or contract, all-in or with surcharges, are commercial matters to be defined between shipper and its provider,” he said.

The EC spent four years investigating possible price-fixing among liner carriers, which centred around whether the GRI mechanism had allowed lines to coordinate on freight rates through “signalling” – when one competitor signals to the other market players when and by how much it alters prices, hoping or even expecting that the others will follow suit.

After finding few signs of collusion, but remaining suspicious of GRIs announced far in advance of implementation, EC representatives demanded that lines should announce GRIs within a month of the start date.

However, carriers pointed out that they had to operate under US Federal Maritime Commission regulations, which stipulate that rate increases cannot be announced less than 30 days in advance – a policy designed to protect US importer and exporters from sudden jumps in pricing – which could have left carriers unable to announce prices on transatlantic services.

To avoid this legal trap, a compromise 31-day limit was agreed by the EC for a trial period.

However, in a letter to the EC’s Ms Vestager from ESC president Denis Schoumert, the shipper lobby group has outlined four key arguments that could allow carriers to collude via GRIs.

Firstly the 31-day limit still gave carriers the opportunity to test pricing levels: “The ESC remains concerned that the practice may enable the parties to test a new price policy without incurring the risk of losing customers. They can also monitor whether or not they can reasonably implement this price increase.”

Secondly, the ability of carriers to coordinate capacity and service levels through the alliance system gives lines “the opportunity to take advantage of the information collected”.

Thirdly, it questioned whether the GRI mechanism might be taken up by other industries: “ESC fears that it might give birth to similar developments in other transport modes, such as air cargo industry.”

And finally, despite current rate levels – at record lows caused by severe structural overcapacity – it warned that this imbalance was expected to reverse at some point in the future.

“As capacity in the future will be reduced, in the years to come, even for big shippers, the GRI might turn into a much more directive instrument which could directly influence tariffs paid by big shippers,” Mr Schoumert wrote.

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  • Gunther Ginckels

    March 18, 2016 at 3:50 pm

    ESC has the nerve to oppose publically announced prices. For buying a box of cornflakes, the EU insists on the announcement of the price including taxes allowing consumers to know exactly what they buy and are able to evaluate value for money – and right so. ESC could find “few signs of collusion”, yet they suspect collusion? The prove is in the pudding; with Asia/Europe rates below Usd 350.-/TEU one can hardly accuse shipping lines of “collusion” except in the shared loss. What if the top-10 carriers decide to go for a trampmarket set-up by only leaving a loadport when a minimum load factor of 95% is accrued and the revenue per ship allows minimum for a breakeven?

  • Carl Lauron

    March 19, 2016 at 12:12 pm

    Price fixing in Shipping Business????? This is a joke. Wake up Brussels!!!! Just have a look at current price level.

    Shipping a container from Asia to Europe is cheaper than a Taxi ride during rush hours in Paris….

    Half of shipping companies are in Europe and the rest in Asia.
    If European Commission wanted to kill European Shipping Industry, they would not really do differently.

    European Parlement looks like working for Asian or US funds, as soon this industry will be sold for nothing.

    European Parlement question should be : how can I help European shipping business instead of giving them a hard time.

    After having killed European steel business, they want to kill shipping.