The International Transport Forum (ITF), administrated by the Organisation for Economic Co-operation and Development (OECD), has today called upon the European Commission to ensure the EU Consortia Block Exemption Regulation for liner shipping is not extended beyond its current timeframe extending to April 2020.
In a 127-page report entitled The Impact of Alliances in Container Shipping, the ITF report warns about the growing fears shippers, port operators, tug operators and freight forwarders have about the monopolistic tendencies among liner carriers and suggests the European Commission should take action.
“Alliances could raise competition concerns in what has become a concentrated market,” the report states, observing that the top four carriers accounted for 60% of the global container shipping market in 2018. The market share of the biggest carrier (19%) is larger than the market share of any global liner alliance before 2012.
“Global alliances give more market power to carriers and have several implications,” ITF maintained. The alliances represent barriers to entry on East-West trades, ITF stated, where only the largest companies would be able to compete on price for Asia-Europe services outside an alliance structure.
“[A]lliances could function as vehicles for collusion between carriers, as they provide carriers with in-depth insights on the cost structures of their competitors,” the study warned, noting, for instance, how Maersk and MSC’s vessel scrapping dates had become much closer together since the creation of the 2M vessel sharing agreement in 2015.
“[A]lliances give very considerable bargaining power – ‘monopsony power’ – to carriers in regard to ports and terminals,” the report continued. The result, according to ITF, can be declining rates for port services, carriers requesting additional public infrastructure, and vertical integration by carriers, in particular in terminal operations. Consequently, the market share of carrier-dominated terminal operators has increased from 18% in 2001 to 38% in 2017.
“This could raise competition concerns if dedicated terminals exclude other carriers and if carriers’ terminal investments raise entry costs that make container shipping a less contestable market,” ITF warned.
The OECD body’s solution to this encroaching market power was to get the European Commission to make sure that the EU Consortia Block Exemption Regulation expires in April 2020, as currently scheduled, rather than extending it.
“A repeal of block exemptions is unlikely to result in the termination of current and future alliances, as these could still be authorised under competition law on a case by case basis,” ITF explained, adding: “However, it would ensure greater scrutiny of individual alliances and thus more effectively deter any anticompetitive conduct in the sector.”
The liner warnings come just after the 10th anniversary last month of the closing of the Asia-Europe box cartel known as the Far Eastern Freight Conference, which was banned by the European Commission.
The report was led by Olaf Merk. ITF is is an intergovernmental body with 59 member countries. It acts as a think tank for transport policy and is integrated with the OECD.