Carriers agree to detail charges in general rate increase announcements to meet European Commission concerns.
The European Commission said Tuesday that 15 container liner shipping companies have said they will stop publishing and communicating general rate increases (GRIs) that are expressed solely as an amount or percentage of the change.
The announcement grows out of an EC decision to open formal antitrust proceedings that investigate the
practice of publishing GRI announcements and whether
carriers engaged in concerted practices in breach of European Union
antitrust rules in November 2013.
The 15 carriers that the EC said regularly announced their intended
future increases of freight prices on their websites, via the press, or
in other ways are China Shipping, CMA CGM, COSCO, Evergreen, Hamburg
Süd, Hanjin, Hapag Lloyd, Hyundai Merchant Marine, Maersk, MOL, MSC,
NYK, OOCL, United Arab Shipping Co., and ZIM.
The investigation started with unannounced inspections, or so called “dawn raids,” on the carriers’ offices in May 2011.
The EC said the carriers have committed for three years that when they make price announcements, they will include the five main elements of the total price—base rate, bunker charges, security charges, terminal-handling charges and peak season charges, if applicable. Those GRIs would be binding on the carriers as maximum prices for the announced period that the GRI is valid, but carriers will remain free to offer prices below these ceilings;
It also said the carriers have committed to not making price announcements more than 31 days before their entry into force, which is usually when customers start booking significant volumes.
The agreement only applies to services moving container cargoes to and from the European Union and European Economic Area.
The EC said it has “concerns that container liner shipping companies’ practice of publishing their future price increase intentions may harm competition and customers by raising prices for their services to and from Europe, in breach of EU antitrust rules.”
But the EC said the carriers that agreed to make changes to their GRIs “emphasized that this should not be interpreted as an acknowledgement that they have infringed the EU competition rules, or as an admission of liability.”
In a preliminary assessment, the EC said it was concerned GRIs “may allow the parties to explore each other’s pricing intentions and to coordinate their behavior”—a practice popularly known as price signaling.
It was concerned that GRIs “may enable the parties to ‘test,’ without incurring the risk of losing customers, whether they can reasonably implement a price increase and thereby may reduce strategic uncertainty for the parties and diminish the incentives to compete.”
The EC said it was “concerned” that this activity violated Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the EEA Agreement.
GRIs, it said, are “typically made three to five weeks before their intended implementation date, and during that time some or all parties announce similar intended rate increases for the same or similar routes and the same or similar implementation date. Announced GRIs have sometimes been postponed or modified by some parties, possibly aligning them with the GRIs announced by other parties.”
The EC said it was concerned the GRI announcements were of “very little value for customers,” because “stating only the amount of an intended increase may not inform customers of the new full price they will be asked to pay in the future” and because the GRIs “may have only limited committal value and thus, customers may not be able to rely on them for their purchasing decisions.”
But the EC noted the carriers “do not agree that they have engaged in the practice
described above nor do they agree with the legal analysis in the commission’s preliminary assessment,” but agreed to commitments about modifying how they handle GRIs “to meet the commission’s competition concerns.”
The EC said there are two exceptions to the commitments the carriers have made. They will not apply to communications with shipper who on that date have an existing rate agreement in force on the route to which the communication refers and communications during bilateral negotiations or communications tailored to the needs of specific identified purchasers.
The EC has invited comments from interested parties on commitments offered by the 15 container carriers to address its concerns related to GRIs.
Maersk Line issued a statement that noted the EC said it “has not established that there is any evidence that an infringement of EU or EEA competition law has occurred and makes no determination as to the existence of such an infringement.
“Maersk Line and the other shipping companies have throughout declared that they have not engaged in any practices that may give rise to any concerns relating to EU/EEA competition law,” the carrier insisted.
“Following a successful market testing of the proposed commitments, Maersk Line will have to formally adopt the commitments before the EU Commission can conclude the case. Maersk Line will do so on the understanding that the EU Commission confirms that there are no grounds for further action, and that the commission will close its proceedings opened on Nov. 21 2013 without finding an infringement of EU/EEA competition law,” the carrier added.
Carriers agree to GRI modifications
