Fourteen of the top twenty Shipping lines are to be investigated by the European Commission on grounds that they may have been artificially increasing sea freight rates. Price fixing in container shipping has long been under the spotlight but the practices that are currently thought to breach EU antitrust rules are different. Rather than highly paid executives from the shipping lines having ‘hush hush’ discussions behind closed doors, what the EU is objecting to is happening in the public domain, posted on websites, often reported in the press and regularly passed on to customers importing their goods from overseas.
What are they doing?
In the past four years shipping lines have announced well over 30 price increases. These announcements are made by multiple shipping lines within a few days of each other weeks from the date they’ll be implemented and the announced increases rarely vary by more than 10-20%. According to the EC, by making regular public announcements of their intentions to increase prices the shipping lines “may harm competition and customers by raising prices”.
The fact that these rate increases have rarely held strong due to market forces is unlikely to be considered relevant by the EC but the implications for the shipping lines involved, reported to include shipping giants like Maersk, CMA CGM and Hapag Lloyd, could be huge. Fines previously dished out to freight forwarders and airlines for price-fixing misdemeanours have ran into hundreds of millions of US Dollars. Fines on this scale could be disastrous for companies in a sector that is neither stable nor hugely profitable.
How will it affect you?
If you’re importing goods by sea from China to the UK then we’d like to think that any investigations abolishing ‘price fixing’ will benefit you. However, as the shipping lines are reportedly struggling anyway it’s more likely to throw more uncertainty over an industry that can’t make its mind up over where the freight rates should be.