Inquiry in the container shipping sector is needed to remove unfair and discriminatory rules

ESC supports CLECAT in its call for an urgent inquiry in the container shipping. High freight costs accompanied by discrimination and extremely low quality of services coincide with high profits of shipping companies and enormous losses experienced by end-users. Does the Consortia Block Exemption Regulation backed by DG Competition fulfil its purpose?

European businesses continue to experience rising container shipping costs, a record low level of reliability and reduced choice of services. Massive freight rate hikes over the last 18 months have led to damaging inflation and increases in the Union’s costs of living as recently identified by the OECD. 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. New discriminatory conduct towards freight forwarders, the key organiser of service delivery across all modes of transport in door-to-door operations, will ultimately disadvantage shippers and end-consumers because of restricted choice in services and higher rates.

This is the key message of a letter to Commissioner Vestager in which CLECAT has asked the European Commission to use its powers of investigation urgently to establish the degree of concentration, consolidation, coordination, and cartelization in the upstream container liner shipping services markets serving the EU, and the downstream markets for freight forwarding services.

CLECAT calls on the Commission urgently to investigate under the EU competition rules, and in the context of the Consortia Block Exemption Regulation (CBER) review, the marketplace effects of the combination of the block exemption (leading to alliances and consortia to shift capacities between trade lanes), vertical integration, consolidation, control of data and the resulting market dominance. In particular, the Commission must investigate the skyrocketing rates which have led to the alliances’ forecast profits of over $200 billion during the Covid crisis despite the absence of any increase in their costs or any reason that can be attributed to the pandemic.

CLECAT notes today that the combination of these factors has enabled the carriers to cherry pick the highest volume shippers for longer term contracts and relegate the others to the spot market where they will pay multiples of the rates offered to the favoured few. Linked to this discriminatory strategy, freight forwarders are being ‘disintermediated’ in the process. In the meantime, the access to container capacity, carrier schedule performance and service reliability has further dropped.

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