×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Anti-trust scrutiny for shipping alliances

Anti-trust scrutiny for shipping alliances
Comment E-mail Print Share
First Published: Tue, Sep 11 2007. 12 20 AM IST
Updated: Tue, Sep 11 2007. 12 20 AM IST
Mumbai: The pooling of fleets by container shipping firms running freight services into and out of India under different alliances will be closely scrutinized by India’s anti-trust regulator for any pricing violations and other anti-competitive actions.
Such alliances that operate on different routes to ensure reliability and availability of services are not banned today under India’s proposed Competition Act. “But, if it (the alliance) contains terms on coordinating prices and supplementary charges or sharing the market, then it is a serious matter,” said Vinod Dhall, acting chairman of the Competition Commission of India.
This is the second time in the past year that global groups of shipping liners have come under the glare of anti-competitive laws. Last year, the European Union decided to end anti-trust immunity given to a London-headed group of 19 shipping lines called the India Pakistan Bangladesh Ceylon Conference—the alliance’s members ship all cargo between Europe and the Indian subcontinent—with effect from October 2008.
As a result, individual container shipping lines will have to negotiate freight rates individually with every one of their customers from that month.
India has decided to follow the EU rule and will not recognize any shipping conference. “Under our Act, there is no exemption for shipping conferences,” Dhall said.
A liner conference is a group of shipping companies that operate on the same route or a set of routes offering equitable freight rates, standardized shipping practices and regularly scheduled services between designated ports. Such conferences were given anti-trust immunity as authorized by the US Shipping Act of 1984, which set regulations for the ocean transport industry and was adopted by other countries. This immunity allowed lines to collectively set prices irrespective of market conditions.
Several shipping services that operate from India to the US, Europe and Pacific Rim are structured through alliances. These services account for a significant amount of shipping traffic to and from India.
For instance, one alliance, the Europe, Pakistan, India and Ceylon (EPIC) consortium, comprising shipping companies CMA-CGM, Hapag-Lloyd and Hamburg Sud, runs a weekly service from Jawaharlal Nehru port, India’s busiest container port, carrying about 1,200 teus, to Europe. A teu or twenty-foot equivalent unit is the standard size of a container and is a common measure of capacity in the container business. The port handles some 20,000 teus a week, giving the EPIC group a 6% share of the business.
Container shipping lines say alliances are not anti-competitive and that attempts to bring shipping alliances under the scope of the Competition Act would “cripple India’s trade”.
“The operating agreement between lines to form a consortium for operating a particular service has no effect at all on pricing,” said Julian M. Bevis, chairman, Container Shipping Lines Association, an industry body. There is no cooperation on pricing and alliances are merely arrangements that have liners share space on one another’s ship, he added.
The collapse of such alliances will have an effect on prices, the trade body said. “If the lines are forced to operate independently, inevitably the costs would go up with a resultant increase in freight rates. Each container shipping line would deploy smaller vessels which will increase the number of vessels calling at Indian ports to load and discharge cargo and add to the congestion at Indian ports,” Bevis said.
With less than six months left for the Competition Commission to start operations, Dhall met the representatives of the container shipping lines on 9 August in the presence of the country’s maritime regulator, the director general of shipping, and apprised them about the new anti-trust law. During the meeting, the regulator made it clear that “concerted actions on pricing” will not be permitted.
Bevis said the body had not received any communication from the Indian anti-trust regulator, adding that the matter would be best decided by the judicial system. “Whether something is allowed or not is ultimately for the courts of the country to decide,” he added.
Dhall said he expected the shipping lines to make a declaration voluntarily that they would abide by the law. “It’s been more than a month since I met the container shipping lines. But they are yet to make a declaration stating that they would stop coordinating freight rates and other supplementary charges,” Dhall said. “Do they expect the commission to serve a notice on them?”
Comment E-mail Print Share
First Published: Tue, Sep 11 2007. 12 20 AM IST