A matter of trust

Malcolm Latarche
Malcolm Latarche

24 March 2017


On the one hand the container sector – or at least some of its major players – continue to call for more consolidation, on the other shippers and anti-trust authorities call for investigations into collusion between lines on setting prices. This week’s issue of subpoenas to several container operators including Maersk, MSC, Hapag Lloyd, OOCL and Evergreen by the US Department of Justice to testify in an anti-trust investigation shouldn’t really have come as a big surprise. Historically, shipping lines have co-operated in setting prices and controlling costs whether through conferences or more recently alliances. Neither have been very well received by cargo interests and in recent times the authorities have usually come down in favour of the shippers rather than the lines. In July last year, EU anti-trust regulators accepted an offer from Maersk and 13 competitors to change their pricing practices in order to avoid having penalties imposed. Shipping lines face roughly similar costs in operating vessels and calling at ports so the fact that freights should be on similar levels across the sector shouldn’t come as a big surprise. And of course there must be an element of profit as well as covering their outlays, but shipping lines’ pleading poverty must be aware that their continual ordering of new ships adding capacity plays into the hands of investigators. If ships aren’t profitable then why order more will be the question they may need to answer. Consolidation may cut costs for lines but it does so at the expense of competition and if the practice follows its natural course the result will be just one or two lines operating. That will probably not be acceptable to the competition regulators and could even result in lines being subject to tougher regulation or even being obliged to restrict operations in order to allow competitors to enter the market. It remains to be seen how the US investigation will play out but if the authorities see the current situation as being structured in favour of shipping lines and act to end alliances as some believe may happen, then the recent run of poor years for the operators will not only continue but could even worsen.