EU Raids Shipping Companies in Anti-Trust Probe

gCaptain
Total Views: 5
May 17, 2011

BRUSSELS—The European Commission raided the offices of shipping lines in a probe of possible price fixing, the first step in an investigation that could lead to fines totaling more than a billion dollars.

Denmark’s A.P. Moeller-Maersk A/S, the world biggest container carrier by volume; No. 2 CMA-CGM SA of France; and No. 4 Hapag-Lloyd AG of Germany said officials visited their headquarters unannounced on Tuesday and requested documents.

The commission said it “has reason to believe that the companies concerned may have violated the antitrust rules that prohibit cartels and restrictive business practices and/or abuse of a dominant market position.”

The subject of the search: a rebound in container shipping rates in 2009 that confounded simple supply and demand.

Maersk, CMA and Hapag said they were cooperating with the investigation and that they comply with competition rules. A smaller line, Hamburg Süd, issued a similar statement. No. 3 shipping company Mediterranean Shipping Co. of Switzerland couldn’t be reached.

‘For several years we have implemented our compliance programme which includes guidelines and training of employees etc. in order to ensure, to the widest extent possible, that our employees are aware of legislation and how to adhere to it,” Maersk said.

The investigation, in cooperation with national authorities, “are a preliminary step into suspected anticompetitive practices,” the commission said. The inspections don’t mean that the companies are guilty, said the commission, the EU’s executive arm.

Since China revved up its export machine in the 1990s, the container-shipping sector has been one of the world’s fastest growing businesses, expanding around 10% a year.

Increasingly, transporting 20- and 40-foot steel containers across oceans has become the standard for moving everything from bananas to electronics around the globe. Ports built new docks. Canals were widened. Carriers ordered hundreds of bigger ships. The number of ships at sea able to carry over 10,000 20-foot containers or their equivalents increased to 48 this year from 15 in 2009. Next year, it will be 61.

But amid that growth came the global financial crisis. Trade in 2009 suffered its worst decline, 12% by value, since World War II. That led analysts to predict a collapse in rates and that at least one shipping line in the top 20 would fail.

That didn’t happen. In January 2009, the index price for shipping a 40-foot container was $1,603. A year later it was $2,517. It has since softened slightly, to $2,436.

“Traditional rules of economics have long not applied to the shipping industry,” said Ashley Craig, a transportation lawyer with Washington-based Venable LLP.

That triggered the curiosity of antitrust investigators in Brussels and Washington, as The Wall Street Journal reported last June. The U.S. Justice Department and Federal Maritime Commission have cooperated with European Union officials, but haven’t announced their findings. EU cartel investigations, which are run by the European Commission, can take years to conclude.

Shipping-industry customers, freight forwarders and other middle men have filed complaints with the EU and the U.S.

According to shipping-industry executives, rates increased because shipping lines laid up vessels, levied surcharges and cut the speed of their ocean crossings, a practice known as slow steaming, which can cut capacity by 5%.

The question, investigators said, is whether the companies acted alone or together. The shipping companies said they acted independently.

The EU in 2008 abolished a long-standing price-fixing exemption for shipping companies. “After the lifting of the exemption, carriers have continued announcing what they want to do their rate levels in the press, which has been described as signaling,” said Dirk Visser, an analyst with Netherlands-based Dynamar BV.

(c) 2011 Dow Jones & Company, Inc.

Back to Main