Has the surge in sea transport prices (rates on some sea routes increased tenfold in less than 2 years) out of control? This question needs to be answered by world trade practitioners and consumers, as well as regulatory agencies that have still not given a clear signal. The report believes that a variety of factors can explain this phenomenon and seem to provide reasons for not intervening. The epidemic has stimulated world demand for products made in Asia; Asia’s economic recovery has brought more transportation needs and spawned the phenomenon of empty containers from U.S. and European ports to Asian ports. This is fueled by stranded ships caused by port congestion, particularly in the United States. All in all, demand for shipping services and containers appears to be far greater than supply. Do these reasons explain everything? Should we, like Federal Maritime Commission Chairman Daniel Maffei, believe that there is nothing we can do under the Maritime Carriage of Goods Act if excessive freight rates are caused by excessive demand?
Charge surcharge
U.S. President Biden sent a clear signal to the U.S. Federal Maritime Commission on August 9 this year, asking the department to “severely crack down on unfair and unreasonable charging practices” and at the same time cooperate with the U.S. Department of Justice to “investigate anti-competitive behavior” and ” Strictly enforce antitrust laws.” The Federal Maritime Commission launched an investigation and sent a questionnaire to various shipping companies. Since then, the department’s attention has been no longer on freight rates, but on surcharges due to port congestion. At the same time, the department launched a lawsuit against Swiss-based Mediterranean Shipping Company.
In Europe, the European Commission’s inaction has been questioned. In the current online container shipping market structure, the committee has an unshirkable responsibility. Because in the past 20 years, apart from approving all mergers and acquisitions in which it participated, the agency has not taken any intervention measures against the phenomenon of global alliances among shipping companies. As a result, three global (shipping) alliances (2M Alliance, THE Alliance, and Ocean Alliance) monopolize 90% of shipping route orders between Asia, the United States, and Europe. Just before the outbreak, Europe renewed its (antitrust) exemption regulations for liner shipping consortiums. The controversial renewal occurred in the context of low freight rates and overcapacity (which proved that the alliance and rationality of concentration). But the European Commission had also expressed concerns before the renewal that shipping lines might take action on capacity supply if they could not directly agree on freight rates.
oligopoly market
Given the current lack of capacity, the perception of the situation should also change. In fact, the exemption regulations for shipping consortiums cannot protect global (shipping) alliances, because each of these alliances exceeds the 30% market share threshold of the relevant shipping routes. Therefore, members of these alliances must at all times be able to prove that their business activities do not involve anti-competitive behavior. When assessing the above issues, industry digitization and the increasingly complete interconnection of information systems among members of global alliances will become factors that must be considered, because the former increases the transparency of a market that is already dominated by oligopolies.
This unprecedented context provides ample justification for the European Commission’s intervention, given the economic impact. Working with the U.S. Federal Maritime Commission to launch an investigation into the charges and capacity management of global shipping alliance members, regardless of its outcome, will help bring clarity to this debate and determine the responsibilities of those involved.
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