27 November 2014

[271114.EN.SEA] ESC Warns 'Risky' Container Shipping Alliances Need Strict Controls

THE European Shippers' Council (ESC) has warned of "a risky development for a free market for transport of goods over sea" with the recent moves towards a global container line market in the hands of four major alliances.

The ESC stated that this would be bad for lines' customers and end consumers "in terms of price and quality of service," if competition authorities do not impose strict conditions on the operation of the alliances, the UK's Lloyd's Loading List reported.

The council pointed out that with this concentration, "world trade is now facing a market dominated by four major alliances that represent more than 95 per cent of the total container vessel capacity worldwide."

The ESC, which was originally set up to oppose the now outlawed "conference system" of container line alliances or cartels, said shipowners had been pushed to this rationalisation to limit costs and reach economies of scale with ever-larger ships and enhanced cooperation.

"All these alliances are reaching a critical point now (only CKYHE is still under scrutiny of the FMC) and they will be allowed to operate without strict or even any control at all.

"ESC, as the shippers' representative organisation, is seeing the aggregation of the market within four huge alliances as a very risky situation," the organisation said.

"Indeed, too much market share in too few hands will lead to an oligopoly where the service quality will be endangered. Shipowners will be, of course, tempted to rationalise even more services to save more money and increase revenues.

"Extremism in rationalisation will take the form of the reduction of the number of direct calls, reduction of the number of services, increase of prices, etc."

It said that the US Federal Maritime Commission (FMC), through Commissioner Lidinsky, had acknowledged the potential competition threat of such a situation and was supporting the organisation of a global summit on competition with competition authorities from the US, China and Europe.

To prepare this summit, and to be able to promote its position, the ESC said it would be meeting with the European Commission's competition directorate "DG COMP" and present its plan for the creation of a monitoring system for alliances.

It said American and Asian shippers' councils would, of course, be encouraged to take the same approach towards their national competition authorities.

"As an example, the European Shippers' Council is willing to see monthly capacity, actual filling rates and monthly average revenue per TEU tracked by competition watchdogs," the ESC said.

"Furthermore, a strict monitoring of freight rates modification following capacity changes has to be created."

Source : HKSG.

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