Pacific carriers settle collusion case

PUBLISHED : Tuesday, 16 September, 2003, 12:00am
UPDATED : Tuesday, 16 September, 2003, 12:00am

14 lines pay US$1.3m and agree to restrictions on rate talks

The busiest carriers on the transpacific trades will pay US$1.35 million to the United States Federal Maritime Commission (FMC) rather than face civil charges for collectively discriminating against common carriers.

The US-based National Customs Brokers and Forwarders Association of America and the International Association of NVOCCs filed the complaint with the FMC in May last year. It was directed at all 14 member lines from the Transpacific Stabilisation Agreement (TSA), including Orient Overseas Container Lines, China Ocean Shipping and Taiwan's Evergreen Marine.

The complaint alleged that the TSA carriers, which did not admit liability, colluded to offer below market-level service contracts to preferred shippers, and thus had discriminated against the non-vessel owning common carriers (NVOCC). The lines have been given 10 days to appeal the settlement terms, but carrier executives said they were unlikely to do so.

The TSA controls about 80 per cent of the vessel capacity plying the Pacific trades, the world's biggest, and the FMC said the lines used that market dominance to manipulate rates and slot supply.

As part of the agreement, the TSA agreed to collectively discuss rates or capacity allocations only at meetings from which the minutes were supplied to the FMC. They also agreed to not discuss vessel 'rationalisation' until 2006.

The out of court settlement is seen as a major blow to the carriers, some of which still believe their general 'commercial needs' should be addressed collectively, and involve discussions on rates and capacity changes.

'Rates are a sensitive issue, but capacity changes and utilisation within an alliance, for example, is not top secret between the carriers,' an executive from an Asia-based TSA carrier said. 'Lines in an alliance should have the right to discuss their vessel and capacity usage without incurring the wrath of the NVOCC community.'

The 46-page FMC report questions whether the TSA has a future and prohibits the carriers from sharing shipper information through new service contracts.

With effect from Sunday, the TSA's jurisdiction over the trades linking to the Indian subcontinent will come to an end unless the lines can show their practices are justifiable. This would be achieved by cancelling the Indamex-TSA Bridging Agreement and a similar deal forged between Evergreen and its subsidiaries, Lloyd Triestino and Hatsu Marine.

The Indamex-TSA agreement extended to the Asia-US east coast trade route via the Suez Canal. Their cancellations would be seen as a move by the FMC to more tightly define the scope of the TSA's control.

Paul Richardson's e-mail address is