Friday, May 20, 2011

Global Container Shipping Lines Hit By EU Freight Price Investigation

Ocean Cargo Under the Spotlight as Offices Raided by Officials
Shipping News Feature

EUROPE – WORLDWIDE – The European Competition Commission has confirmed that on Tuesday it commenced a series of unannounced raids on the offices of many of the world’s largest container shipping lines. The freight carriers are well used to accusations of collaboration and there has always been a fine line between cartel activity and shipping associations meeting to discuss the stability of the container freight trade such as the Trans Pacific Stabilization Agreement.

The Trans Atlantic Stabilization agreement foundered many years ago after facing criticism for perceived cartel activity and, as we have pointed out before, box shipments and bulk freight operations are financed in a completely different manner. The EU Commission say it has reason to believe that the companies concerned may have violated the antitrust rules that prohibit cartels and restrictive business practices and possibly abused their dominant market position.

Unannounced inspections are a preliminary step into suspected anticompetitive practices and the Commission never officially reveals those companies which are currently under investigation but Maersk Line, as the largest container carrier, has indicated they are cooperating with the investigation and all of the other major box lines are also believed to be involved, full details will no doubt be revealed in due course.

Investigations of this type invariably also take an inordinate amount of time given the complexities of any alleged offences, the line between cooperation and collusion being a very fine one. As we have stated before the case for a brake to be put on a runaway rate war, as has been seen previously in the container industry, is a strong one with short term gains for shippers offset should the resultant situation mean less competition from a decreasing number of shipping lines, not to mention the potential loss of thousands of jobs.

What is certain is that the sooner the full scope of this latest investigation becomes public the better, investors are still reeling from the size of the penalties imposed worldwide after a series of air freight rate fixing scandals dating back almost a decade.

Photo: Maersk Headquarters