Asia the last battleground in fight to destroy shipping lines' cartel

PUBLISHED : Wednesday, 08 September, 2010, 12:00am
UPDATED : Wednesday, 08 September, 2010, 12:00am

Asia is set to become the last battleground between shipping lines and shippers over the ending of the shipping companies' cartel if North American regulators follow the European Commission and agree to end antitrust immunity for container shipping lines.

John Lu, chairman of the Asian Shippers' Council, said: 'Not only will be Asia be the last battleground, but as the shipping lines are consolidating in this region, the battle will be fierce. Government support for shipping lines is far stronger in Asia.' This was because many carriers, including Cosco Container Lines, China Shipping Container Lines, Singapore's APL and the large Japanese firms such as Mitsui OSK Lines, are either state-owned or have the tacit support of their governments.

Lu was speaking yesterday at the end of a three-day annual meeting of the Asian Shippers' Council and the Global Shippers' Forum, an umbrella group that represents shippers in Asia, Europe, North America, South Asia and Africa.

Shippers are the manufacturers and cargo suppliers that use container carriers to export and import products. Europe has already seen the end of anti-competitive behaviour by shipping lines after the European Commission introduced tougher laws in October 2008 that outlawed collusion over the fixing of container shipping rates, fuel and other surcharges and putting limits on container capacity.

The United States would enact similar legislation if proposals by Congressman Jim Oberstar are approved in the next few weeks. Putting forward his plans earlier this year, Oberstar, head of the House of Representatives transportation and infrastructure committee, said: 'I think we should end the antitrust immunity that allows the carriers to talk to each other about rates, and if we replace that with full competition, there will be a real marketplace that would see improvements in rates and service and delivery to consumers.'

He said the action of container lines, which include imposing surcharges, increasing rates and refusing to carry shipments unless shippers pay the higher rates, had cost retailers business and increased prices for US consumers.

Lu pointed out that the 15 shipping line members of the Transpacific Stabilisation Agreement carried about 85 per cent of the total containerised goods across the Pacific Ocean. But this cartel would collapse if Oberstar's proposals became law. Outlining the impact of shipping cartels, Lu said one estimate said mainland shippers paid an extra US$1 billion a year in cargo and fuel surcharges to container lines, but he added that mainland shippers said 'it was much more'.

Christopher Welsh, general manager of policy campaigns at Britain's Freight Transport Association, said if Oberstar's proposals were accepted, they 'could become law very fast'. This was partly because US President Barack Obama was not only supporting Oberstar but also trying to stimulate the economy with a US$50 billion employment package.

Welch said that with competition reform under way in Europe and North America, the lack of similar action in Asia would place the region 'at a competitive disadvantage'.

This was reflected in a joint declaration at the end of yesterday's meeting in Macau in which the Global Shippers' Forum said Asia was the missing link in the introduction and application of antitrust laws to be applied to the shipping industry, and that 'Asian governments should introduce the appropriate competition laws to prohibit liner conferences and discussion agreements that eliminate effective competition in Asian trades.'