Shippers Demand Review of EU Competition Rules for Container Shipping
Citing continued increases in freight rates, reductions in capacity, reliability, and quality of service, ten organizations representing European shippers, freight forwarders, terminal operators, and others in the supply chain are demanding that the European Union immediately begin a review of competition regulation for the container shipping industry. After twice before in 2021 calling for similar action, the organizations say they are “disappointed” in the EU’s lack of action compared to other regulators including the United States.
“There is a striking contrast between the approach of the Commission and the vigor with which the Federal Maritime Commission in the US, and a number of other competition authorities globally, have pursued action against the lines, and the revelations of anticompetitive behavior which emerged from their investigations,” the groups write in the letter addressed to Margrethe Vestager, European Commission Executive Vice-President and Commissioner for Competition.
Supporting the renewed call for action, the groups cite data from a newly released report by The International Transport Forum, which highlights the seven-fold increase in freight rate and the reduction of capacity in Europe. They highlight that the carriers have increased margins up to 50 percent resulting in a net profit of $186 billion last year while service issues and costs rose for shippers.
With the EU’s current Consortia Block Exemption Regulation, which exempts carriers from key provisions of the restrictions meant to foster competition, due to expire in less than two years, they are calling for an immediate review to commence. The review would allow the industry to submit its arguments and begin the discussion on how the container shipping markets operate. The groups argue that the time is required to properly determine future regulations.
“We believe many of the excesses of behavior exhibited by shipping lines arise from the open-ended and highly favorable terms in which the current regulation,” the groups write. “The regulation does not seem to be able to accommodate major changes in this market over the past few years, including developments in information standardization and exchange, shipping lines’ acquisition of other supply chain functions, nor how the shipping lines have been able to leverage these to accrue supernormal profits at the expense of the rest of the supply chain.”
Their renewed effort comes as the U.S. Federal Maritime Commission moves to enforce the changes to the Ocean Shipping Act. Last Friday, the FMC issued an advisory warning carriers that they must immediately “come into compliance with all self-executing provisions in the Ocean Shipping Reform Act of 2022, specifically the requirements for demurrage and detention billing. As previously advised to the trade, there is no phase-in period for this provision of law. The law, and its requirements, related to demurrage and detention charges, became effective June 16, 2022.”
The EU initiative is being led by the Global Shipper Forum as one of the signatories to the letter. The 10 groups endorsing the letter include the European Association for Forwarding; Transport, Logistics and Customs Services (CLECAT); Federation of European Private Port Companies and Terminals (FEPORT); European Shippers’ Council; Global Shippers Forum; FIATA International Federation of Freight Forwarders Associations (FIATA); International Association of Movers; International Union for Road-Rail Combined Transport; FIDI Global Alliance; European Barge Union; and European Tugowners Association.