Monday, February 21, 2022

As Unexplained Container Costs and Cancellations Rise It Seems Action is On the Way

Twin Trials and Tribulations Have Been a Salutary Lesson for Government
Shipping News Feature

UK – There are welcome signs that this government, and the various regulatory authorities, have learned important lessons with regard to the supply chain following the horrific blunders made during the pandemic and Brexit (à la Grayling and the ferryless ferry company).

There have of course been disagreements, witness the rapid departure of the Road Haulage Association (RHA) Chief Executive following accusations of leaking private meeting with government details to the press (pots and kettles anyone?). Those in charge like to be seen as the ones with the power. Now it seems that the industry’s professional associations are recognised as knowing most about the transport business, certainly more than the Civil Service (cheap PPE anybody?).

And so it is that, just weeks after British International Freight Association (BIFA) Director General, Robert Keen wrote to the Department for Transport, a letter then forwarded to the UK Competition and Markets Authority (CMA) and setting out a case for an investigation into container line business practices and spiralling container rates, comes the news of action.

The CMA, together with four other competition authorities, have created a working group that will meet regularly to develop and share intelligence to detect and investigate suspected anti-competitive behaviour and collusion in international container markets, using existing international cooperation tools.

Keen is of course claiming no great credit but doubtless the action, coordinated or otherwise, which witnessed the cacophony of international protests as the miscellaneous box charges rose seemingly inexorably has moved the authorities to act. In the US the Federal Maritime Commission (FMC) has already started to look closely at the carriers and how they calculate their actions.

The UK’s main trade association for freight forwarding and logistics companies says that its members are extremely concerned that practices undertaken by container shipping lines, as well as easements and exemptions provided to them under competition law, are distorting the operations of the free market to the detriment of international trade. BIFA will be making those points in a meeting that it will be having with the CMA in March.

For BIFA members there is a particular bee in their collective bonnets, that of having their contract rates cancelled by container shipping lines forcing them onto the more expensive spot market. Limiting access to the market is causing the members considerable concern. Robert Keen explains:

“We are convinced that the well-documented chaos within the container shipping sector is leading to commercial power becoming increasingly concentrated, resulting in diminished market choice and competition, and distorted market conditions. It will be interesting to see if the five competition authorities find that the current supply chain disruptions are a direct result of anti-competitive conduct.

“BIFA members fully accept that a free market economy is open to all, but are increasingly concerned that the activities of the shipping lines, and the exemptions from legislation from which they benefit, are adversely and unfairly affecting their customers, especially freight forwarders and SME businesses.

“The facts speak for themselves. During a period that has seen EU block exemption regulations carried forward into UK law, there has been huge market consolidation. The pandemic has highlighted and accelerated this development, which has also contributed to dreadful service levels, and hugely inflated rates, with carriers allocating vessels to the most profitable routes with little regard to the needs of their customers.”

The five competition authorities are joining a growing number of organisations, including CLECAT and FIATA, the US Federal Maritime Commission, and the Australian Productivity Commission, in calling for governments at a national and pan-national level to give careful consideration to evolving business arrangements in the container shipping market to see whether they are in breach of competition law.