U.S. Manufacturer Charges Carriers With Collusion in FMC Complaint
Pressure is continuing to grow against the major shipping companies over accusations of unfair business practices and taking advantage of the current surge in volumes to the detriment of the shippers and especially smaller companies that lack the clout of the largest shippers. In the latest step in the ongoing struggle, a smaller U.S. furniture company has filed a complaint with the Federal Maritime Commission seeking $600,000 in its suit, which alleges market manipulation and collusion among the major carriers.
The first action of its kind by a shipper during the pandemic was reported over the weekend by the trade publication The Loadstar. In the report, they said the action names container shipping majors MSC and Cosco accusing them of violating the 1984 US Shipping Act by not honoring terms of their contracts and not making space available to the Pennsylvania furniture manufacturer MCS Industries.
Carriers, they allege, are taking advantage of the current surge and through their alliances - which control 90 percent of capacity on the Pacific - are colluding to drive up rates, primarily at the expense of the smaller shippers. “Global ocean carriers began taking parallel and strikingly similar actions to prop up ocean carriage pricing and improve their profitability at the expense of shippers and the public,” the filing with the FMC says, according to Loadstar.
The manufacturer says that it began more than a year ago with carriers blanking sailings to create an “artificial scarcity,” which propped up spot prices for containers early in the pandemic and then lead to the surge in pricing and lack of capacity that shippers have been complaining about for months. It is creating a surge in costs which in turn is being passed on to consumers in higher costs or resulting in a shortage of goods for retailers.
In the report from Loadstar, they said that MCS, which counts all the U.S.’s largest retailers as its customers, says it has direct evidence of the carrier misconduct, but details were not provided in the filing. It goes on to say that carriers used the artificial constraints in capacity not only to drive prices up but also have been failing to honor contracts forcing smaller shippers on to the spot market. MCS says several ocean carriers have refused to negotiate contract prices or directly denied service in violation of the U.S. shipping laws.
MCS’s filing with the FMC came in the same week as the commission held an open hearing about the problems and complaints of shippers. During the hearing, Commissioner Rebecca Dye proposed amending the law to make it easier for shippers as well as truckers and forwarders to file complaints and seek damages from ocean carriers. MCS, however, believes it has a strong case and found the opportunity to file a complaint and seek damages even before the FMC acts.
The FMC has found itself under growing pressure on multiple fronts to take action to address the complaints of shippers and ports during the current surge. President Joe Biden called on the FMC to move aggressively to deal with the problems in the market, and the FMC announced actions including forming a new audit function and working with the Department of Justice to increase enforcement.
Experts believe that MCS’s case will be closely watched as it could signal a new stance toward carriers and be the first of multiple actions. In the meantime, however, the surge in the container market continues. Just today, shipping major AP Moeller - Maersk increased its profit forecast for 2021 by nearly a third or $5 billion. Given its strong results in the first half of the year and a strong outlook for at least the remainder of 2021, they are now forecasting earnings before taxes of $14 to 15.5 billion in 2021.