News / Shippers reject carriers' opposition to ending anti-trust rules

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Shipping lines today voiced their criticism of the US Ocean Shipping Antitrust Enforcement Act (OSAEA) with carriers claiming the bill will hit efficiency and increase costs, but shippers say vessel sharing agreements can be operated without anti-trust immunity.

OSAEA seeks to repeal anti-trust exemptions for carriers, but the shipping lines argue that this will also prevent lines from entering into vessel-sharing agreements (VSAs)..

Sponsored by six Democrats and two Republicans, the bill was put forward in February last year, at the height of supply chain congestion in the US and freight rates at historic highs.

Last Friday Democratic Congressman Jim Costa explained the thinking behind the bill: “For far too long, foreign shipping monopolies have manipulated the ocean shipping industry and employed unfair trade practices, hurting American exporters and consumers.”

Co-sponsor John Garamendi added: “Foreign-flagged cargo vessels need to understand that access to the American market and its consumers is a privilege, not a right. Congress must restore balance at our ports and tackle the longstanding trade imbalance America has with China and other nations.”

However, a US source told The Loadstar that the bill’s progress through Congress is only just beginning and there is a long way to go.

The source added: “DOJ has published guidelines for competitor collaboration that have to be followed by every other industry. None of the other modes of transportation has such broad antitrust immunity in the US and companies in those industries work well together when necessary in compliance with antitrust law.”

Moreover, the source called for better regulatory scrutiny to help define the regulations and to implement them.

“The marketplace effect of vessel sharing agreements should be subjected to much greater oversight, as they have a tendency to take the supply of capacity off certain trade lanes, which can effect both rates and the economic viability of some ports.

Nicolette van der Jagt, director general at Clecat told The Loadstar forwarders wanted to see an end to anti-trust immunity, but [President] Biden had “turned to antitrust enforcers” to give the much-needed attention to the supply chain problems linked to alliance agreements, these need visibility and transparency.

“Other modes of transport do not have anti-trust immunity… so why do carriers need it? asked Ms van der Jagt. “It can’t just be for vessel-sharing agreements, because they can have that without anti-trust immunity.”

Clecat, which represents freight forwarders, added that vertical integration by the shipping lines is more important than the VSA’s, “including the acquisition of operators up and down the supply chain”, which should be subjected to much closer scrutiny by the antitrust regulators.

“DOJ and the Federal Trade Commission have jurisdiction over such mergers and acquisitions. We understand that the administration has already begun to look at such integration in other industries, such as health care, technology (Amazon, Facebook/Meta) and others, and ocean shipping should be added to that list, including the growth of carrier-controlled data platforms that enable them to control end to end services up and down the supply chain,” added Ms van der Jagt.

Meanwhile, Global Shippers’ Forum (GSF) director James Hookham also supports the end of ATI: “GSF supports the move to end anti-trust immunity and, if necessary, its replacement, with more transparent, better-targeted rules to facilitate VSAs in consortia that are easier to enforce.”

Mr Hookham said anti-trust immunity was always “a blunt instrument” with which to deal with transport issues. He added: “Self-regulation is fine, but it needs regular oversight and scrutiny. You can’t just ‘legislate and forget’ in a market as dynamic as global shipping.”

However, World Shipping Council president and CEO John Butler said: “Nobody has offered a reason why we should throw away such a useful tool as vessel-sharing arrangements. I think some of the rhetoric comes from a misunderstanding about how VSAs help the supply chain work better.”

The WSC said VSAs provided the ability to fill ships with cargo, thereby making them more efficient, with each carrier within the VSA deciding its own commercial terms, maintaining competition.

Mr Hookham added: “One of the industry’s myths is that ending ATI spells doom for the alliances and liner consortia generally.” He pointed out that airlines “happily act in consortia with code-sharing arrangements, similar to vessel sharing agreements, and they don’t have a block exemption/anti-trust immunity from competition rules”.

“it’s not quite rocket science, just look over the modal garden fence!” Quipped Mr Hookham.

He concluded: “If the shipping industry really believes its business model is under threat from [the] removal of anti-trust immunity, it would be (should be) proposing alternative arrangements that address the concerns of its customers and regulators.”

Meanwhile, the European Commission is also in the process of reviewing its anti-trust immunity regulation, the Consortia Block Exemption Regulation, but has delayed its response to representations from industry until the summer.