Thursday, February 9, 2017

Russian Container Freight Rate Anomaly Catches Out Maersk

Fine for Box Line for Following Usual Practice on Tariff Hikes
Shipping News Feature
RUSSIA – DENMARK – Maersk Line has reached an agreement with the Russian Federal Anti-monopoly Service (FAS) to settle allegations that it, along with several competitors, breached the country’s competition law by publically announcing the freight rates for the Russian market. While the practice of publishing rates is common, it is has also drawn concern from the European Commission, which last year collaborated with some of the biggest names in container shipping to set out a series of commitments to alleviate any anti-competition concerns.

Maersk Line still incurs a US$230,000 fine by the FAS instead of the $12 million penalty the company initially faced. FAS found no evidence of cartel behaviour, though under a specific provision in the Russian competition law, the act of publically announcing the rates constituted a non-cartel concerted action.

As part of the agreement reached between Maersk and the FAS, Maersk Line have committed to end public price announcements for cargo to Russian ports, instead opting for more private exchange in the form of email or a password protected website. Camilla Jain Holtse, Head of Competition Law at Maersk Line, said:

“The case concerned a unique Russian provision that does not exist in other countries. This agreement shows the commitment of both parties to find a solution that creates clarity for the future.

“We look forward to continuing our engagements in Russia. We appreciate the constructive and professional dialogue we have had with FAS on the matter. We are committed to comply with all applicable laws and regulations and we work hard to ensure compliance.

“We welcome FAS’ decision to opt for international regulatory standards. FAS has recognised the global nature of liner shipping and the compelling need for a coherent regulatory approach. This is a very positive international precedent as it supports our global industry to apply an aligned global regulatory approach.”

These price announcements, known as General Rate Increases or GRI announcements, do not indicate the fixed final price for the service concerned, but only the amount of the increase in US$ per transported container unit, the affected trade route and the planned date of implementation. They frequently effect sizeable increases of several hundred US$ per TEU.

General Rate Increase announcements are made typically 3 to 5 weeks before their intended implementation date, and during that time some or all of the other carriers often announce similar intended rate increases for the same or similar route and the same or similar implementation dates. Carriers are not bound by the announced increases and some carriers have indeed postponed or modified announced general rate increases, possibly aligning them with those announced by other carriers.

The FAS initiated formal cartel activity proceedings against fourteen container line in 2013, when the Russian offices of Maersk, MSC, CMA CGM, APL, K Line, NYK, OOCL, China Shipping, HMM, ZIM, Cosco, Evergreen, and Ocean Container Services, were raided. By the end of 2015, the list had been narrowed down to 5: Maersk, CMA CGM, HMM, OOCL, and Evergreen.