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SeaIntel: Common rate jump could be common sense

It is the expression of logic and common sense when the major container carriers raise rates with almost the same amount and at the same time, the analyst company SeaIntel thinks. SeaIntel has examined a number of rate increases and has concluded that “if carriers are indeed colluding illegally on the Europe trade presently, they appear to be uniquely poor at doing so.”

Photo: Port of Gothenburg

In May 2011, the EU competition authorities carried out a number of dawn raids at a total of 12 container carriers including the three largest carriers, Maersk Line, MSC and CMA CGM, following suspicions that agreed rate increases were a possible breach of the EU cartel and competition regulation. The result of the raids has still not been published,

Now, the analysis company, SeaIntel has examined a number of general rate increases, the timing of the carriers’ website and media announcements and the timing of the coming into force of the rate increases, on several main routes between Asia and Europe and Asia and North America and where liner conferences are either allowed (the Pacific Ed.) or prohibited (to and from Europe Ed.)

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Close correlation

SeaIntel concludes that there is a difference depending on whether or not the conferences are allowed. For the conferences, the extent and dates of the rate increases are more connected. For Asia-Europe, it may indicate that the carriers operate independently but on the other hand, there seems to be a close correlation when announcing the rate increases to the market.

Based on its analyses, SeaIntel cannot conclude whether or not the carriers are breaching the competition regulation. However, several conditions speak in favour of a breach not being the case. If carriers were to cooperate on routes on which it is not allowed they would naturally agree not to raise rates on the same time and to the same extent, SeaIntel states in its analysis.

If the market is one in which the competition is fierce, carriers will constantly monitor their competitors. When rates in container shipping become too low, a carrier will choose a time in which to raise its rates and leave its competitors with the choice to follow suit or do nothing.

Common sense

“For a carrier it is therefore simple common sense to follow suit with a similar announcement once one of the other carriers has done so. Furthermore, it would be common sense to announce an increase roughly in line with the announcement already out there,” SeaInte states.

“If the carriers are indeed colluding, why are they only able to maintain this for relatively short periods of time before undercutting each other again?” SeaIntel asks. As an answer, SeaIntel states that if carriers indeed collude illegally they do so very poorly. Therefore, logic and common sense both indicate that that is not the case.

A few months ago, the 12 container carriers raided in May 2011 in a common action by the European Commission were once again criticised by the Brussels-based European Shippers Council which called for the European Commission to once again examine the “apparently coordinated moves” of the container carriers when cancelling departures and pulling out capacity in order to avoid rate drops.

In November 2012, a senior European Commission official underlined that the carriers are still under scrutiny and that the survey has still not been finalised.

The 12 carriers which were paid unannounced visits at same time were Maersk Line, MSC, CMA CGM, Cosco, Evergreen, Hapag Lloyd, APL, Hanjin, OOCL, Hamburg Süd, MOL and NYK.

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