Anger at ‘anti-competitive’ practices of shipping lines

The European Commission is being urged to investigate claims that shipping lines operate anti-competitive practices and are banking record profits from ‘skyrocketing rates’ during the Covid pandemic.

The call comes from the European freight forwarder association Clecat which represents 19 000 companies employing more than one million people in logistics, freight forwarding and customs services. It has written to competition commissioner Margrethe Vestager, calling on the commission to establish ‘the degree of concentration, consolidation, coordination, and cartelisation in the upstream container liner shipping services markets serving the EU and the downstream markets for freight forwarding services’.

Clecat says European businesses have endured ‘massive freight rates’ over the past 18 months, low levels of reliability and a reduced choice of services. ‘The profiteering of ocean shipping carriers resulting from their capacity management strategy allowed them to acquire the market power and financial war chest that they are now using to vertically integrate, increase rates and drive out independent freight forwarders in the downstream market,’ a press release says.

Clecat alleges that carriers ‘cherry pick’ the highest volume shippers for longer-term contracts and relegate the others to the spot market and higher rates.

Oligopoly market

Director-general Nicolette van der Jagt complains that the consolidation of the lines leads to fewer service options, constraints on the supply of space and a market dominance. ‘Three alliances consisting of eight carriers now control 80% of that trade,’ she says. ‘This is an oligopoly charging oligopoly prices.’

Clecat is also unhappy that the carriers’ exclusive control of access to critical trade data reinforces their power to limit competition and enhances their ability to control rates. Van der Jagt concludes: ‘The availability of these special privileges harms the relations between shipping lines and freight forwarders and their customers and takes away the trust which is so much needed at times of continuing congestion and disruptions.’

Collaboration review

She wants a detailed investigation into the so-called Consortia Block Exemption Regulation (CBER) which allows collaboration between freight lines, saying an earlier review had been superficial. Another review into the current CBER is expected in the spring and Clecat believes the commission ‘must consider the impact of vertical integration has had on the market’.

Meanwhile, Canada, the US, Australia, New Zealand and the UK have formed a partnership to ‘prevent anti-competitive conduct from occurring in the supply and distribution of goods’. Reuters has also reported that the US Justice Department’s anti-trust division and the FBI are ‘to detect and prosecute companies that take advantage of supply chain disruptions to collude with rivals in order to raise prices’.