24th March 2022, in its response to Member of the European Parliament Vera Tax regarding the situation in the maritime sector – competition, the selective picking of cargo and routes, and surging freight rates in particular – the European Commission says that they are “well aware that the current situation poses challenges to European businesses including small and medium-sized enterprises’’.
“The Commission exchanges regularly with regulators, competition authorities, and market participants (e.g. freight forwarders, shippers, port operators, and carriers) to understand the circumstances in the sector, and identify any scope for intervention that can facilitate return to normal operations’’.
“The monitoring of the sector, the EC says, has not identified any anti-competitive behaviour from alliances aimed at increasing freight rates. This view was shared also by the United States and China regulatory authorities at the Maritime Summit of September 2021. In this context, it does not seem that regulatory intervention could substitute market mechanisms in sorting out the current congestion problems in logistic chains and imbalances between demand and supply in the maritime transport sector’’.
If we look at the briefing from the US White House of the 22nd of February this year, “The President is announcing a historic agreement between the Department of Justice and the Federal Maritime Commission (FMC) to make sure that large ocean freight companies cannot take advantage of U.S. businesses and consumers. Right now, three global alliances, made up entirely of foreign companies, control almost all of ocean freight shipping, giving them power to raise prices for American businesses and consumers, while threatening our national security and economic competitiveness’’.
In the briefing, they also state that “these companies [large ocean freight companies] have formed global alliances—groups of ocean carrier companies that work together—that now control 80% of global container ship capacity and control 95% of the critical East-West trade lines. This consolidation happened rapidly over the last decade. From 1996 to 2011, the leading three alliances operated only about 30% of global container shipping. Significant consolidation occurred in the years running up to the Pandemic’’.
The Commission states that it is on the same footing with the US and China. But just looking at the US, it is evident that the European regulator perceives the situation in the maritime market differently than its American counterpart.
If the US could reveal the significant consolidation, what resources or intention is the European Commission lacking to fulfil a thorough and trustworthy investigation? Can we rely on the next EC evaluation of the Consortia Block Exemption Regulation? Will the EU protect European consumers?
European shippers confirm that the problem exists and expect the EC to accomplish its function as a guarantor of fair competition. Notwithstanding the nature of the current development – a market issue or a legal distortion – ESC wants to have a healthy environment for doing business for its members. High profits of container lines do not translate into the benefits of shippers in no way possible. If container lines’ practices have a direct connection with the CBER, it is important to cite that “Article 101(3) TFEU allows declaring such agreements [consortia agreements] compatible with the internal market provided they contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefits’’. Whether there is a connection of the current practices with the CBER or not, ESC expects the European Commission to mend the distortion in the maritime market.
For more information, please see here:
1. The response of the EC of the 24th of March 2022
2. The briefing of the White House of the 22nd of 2022
3. Previous question from the EP asking the EC about the maritime situation