EUROPE – US – ASIA – WORLDWIDE – In two hugely significant moves this week on opposite sides of the Atlantic we are seeing international regulators once again seeking signs of antitrust activity within the container shipping market. In a subject we have covered seemingly endlessly (type cartel into the News Search box) once again we witness antitrust bodies in the EU and America studying what the freight carriers view as perfectly normal commercial behaviour.
Today (22 November) the European Commission has opened formal antitrust proceedings against a range of container lines in order to form an opinion as to whether the fact that it is common practice to announce box rate increases in advance constitutes unfairly competitive behaviour. Many in the industry will scoff at the timing citing ample evidence that current rates have fallen to unsustainable levels in the past year or so. The fact that so many companies have all decided to announce similar increases at roughly the same time however is what has alerted the authorities to the situation.
The Commission says that since 2009, companies have been making regular public announcements of price increase intentions through press releases on their websites and in the specialised trade press. These announcements are made several times a year and contain the amount of increase and the date of implementation, which is generally similar for all announcing companies. The announcements are usually made by the companies successively a few weeks before the announced implementation date.
The Commission has concerns that this practice may allow the companies to signal future price intentions to each other and may harm competition and customers by raising prices on the market for container liner shipping transport services on routes to and from Europe. The Commission will now investigate whether this behaviour amounts to a concerted practice in breach of Article 101 of the Treaty on the Functioning of the European Union (TFEU) and of Article 53 of the European Economic Area (EEA) Agreement.
Investigations of this type are ongoing in the sense that there is no legal deadline for bringing an antitrust investigation to an end. Whilst the Commission has not named the companies under investigation the matter is surely linked to the infamous dawn raids which saw several high profile firms have their offices invaded by EU staff in May 2011.
One of the companies involved in that episode were Maersk Line, also part of the current US investigation into the ‘P3’, the alliance between the Danish group, Swiss based Mediterranean Shipping Company (MSC) and CMA CGM, a grouping of the three largest box carriers in the world. The Federal Maritime Commission (FMC) has announced it will accept further public comment on the P3 Network Vessel Sharing Agreement until midnight Friday, November 29, 2013. The group formally lodged their agreement with the FMC in October, having been prompted to join forces in a bid to cut costs, with continuing over capacity impinging on freight rates and thus affecting company finances.
The deal, which would see the three share vessels under a common management office whilst retaining individual commercial status and control of consignments, as detailed here in June, would authorise the applicants to share vessels and engage in related cooperative operating activities in the trades between Asia, North Europe, and the Mediterranean on the one hand and the U.S. on the other.
The FMC has given itself until Sunday, December 8, 2013 to request additional information from the three or to seek an injunction to prevent the agreement taking effect. Should it decide to take no action the agreement will come into effect immediately. Federal Maritime Commissioner William P. Doyle, commented:
"It’s important to allow the shipping public and stakeholders the opportunity to comment on an alliance such as this that comprises the world’s three largest container ship carriers. I would like to hear from stakeholders who are comfortable with the proposed alliance and those that may not be comfortable with the proposed alliance; and if stakeholders believe the P3 filing needs more clarity and/or other assurances, then I would like to hear their ideas in this regard. I am looking forward to reviewing the FMC’s staff analysis on the proposed alliance and following up with additional questions to the P3 principals."
EC launches investigation into container lines to see if they colluded on GRIs
©Rob Sturges
The European Commission has begun formal proceedings into “several major container shipping lines” to investigate whether they broke antitrust regulations in the announcement of general rate increases.
The investigation follows a series of raids on the European headquarters of 14 carriers more than two years ago. They included Maersk, CMA CGM, Hapag-Lloyd, Hamburg Süd, NOL, Hanjin, Evergreen and Cosco among others.
The EC investigators were acting on shipper allegations that lines could be colluding on freight rates.
Maersk Line has released a statement confirming that it was part of the investigation but denied any wrongdoing.
The carrier said: “No formal letter from the commission on the matter has been received yet, but we have been informed that we will be part of the investigations.
“AP Møller-Maersk has no reason to believe that Maersk Line has behaved in a manner not in accordance with EU competition law,” it added.
The investigation will focus on the way in which general rate increases, particularly on the main Asia-Europe westbound trade, have been announced at similar times and by similar amounts.
An EC statement released this morning said: “Since 2009, these companies have been making regular public announcements of price increase intentions through press releases on their websites and in the specialised trade press. These announcements are made several times a year and contain the amount of increase and the date of implementation, which is generally similar for all announcing companies. The announcements are usually made by the companies successively a few weeks before the announced implementation date.
“The commission has concerns that this practice may allow the companies to signal future price intentions to each other and may harm competition and customers by raising prices on the market for container liner shipping transport services on routes to and from Europe.”
The latest round of GRIs came on 14-15 November, when most of the major carriers on the Asia-Europe trade announced a rate increase of between $750 and $775 per teu to be implemented on 15 December; while the previous implementation of GRIs was at the beginning of November.
Signalling remains a notoriously difficult concept to prove, given that in a free market companies are at liberty to advertise prices – which intrinsically flags its pricing to a particular market.
However, in an interview with The Loadstar last year, an EC competition spokesman explained: “It is not the secret nature of contacts that make them illegal under EU law, but the fact that competitors consciously decide to co-ordinate their behaviour on the market.”
And according to legal journal The Antitrust Source, European law “separately prohibits so-called concerted practices, an often ambiguous concept but one the commission describes as requiring something less than an express agreement. And the commission’s recent guidelines show a willingness to stretch the concept still further to reach suspicious conduct”.
However, it adds: “Horizontal guidelines acknowledge that companies have ‘the right to adapt themselves intelligently to the existing or anticipated conduct of their competitors’.
“Unlawful concerted practices instead are limited to instances where there is some direct or indirect communication between competitors with the potential to harm competition.”
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