Airline price-fixing probe raises questions in seafreight sector

Competition exemption covers surcharge ‘similarity’ ALAN PEAT THE RECENT investigations into price fixing among airlines have raised serious questions in the freight and trade industries about their seafreight counterparts. There is a distinct similarity in what is being investigated amongst international airlines, and the practice in the shipping industry, FTW was told. What is at question in the surprise move by international competition bodies is whether there has been possible collusion by airlines over surcharges. Even if no hard evidence of price-fixing is uncovered, trade associations have been quoted in the media as saying that this investigation would be helpful in forcing carriers to justify long-term surcharges. Quoted in Airwise News, the European Shippers’ Council (ESC) secretary-general Nicolette van der Jagt said: “Shippers for a long time have been concerned about nearly identical levels of surcharges in respect of fuel price increases, new security measures and other factors.” Now isn’t it also generally the case that when one shipping line raises a surcharge (often at the suggestion of a shipping line conference) the rest, including independents, follow suit? SA shipping expert Nolene Lossau certainly thinks that’s the case and that these similar surcharge increases smack of a form of collusion. “And you can’t have that,” she said, reducing the argument about surcharge similarity to simple terms. “Every ship is different (in its capital and operational costs), and so every surcharge should be.” Looking for answers in the shipping industry, FTW was told that there’s a distinct difference between airlines and shipping lines – with the latter having exemption from certain competition authority rulings. “Aside from five or six jurisdictions, all the others in the world have recognised the differences,” was how one argument from a senior person in the shipping industry was phrased. “These practices in shipping have been accepted internationally for years,” he added – referring to surcharges and the bunker (fuel) surcharge specifically. What it all boils down to in local terms (where there is currently no exemption) is that the Association of Shipping Lines (ASL) has had a revised application for exemptions before the SA Competition Commission since November last year. Basically what they are looking for are price setting formulas that will allow lines to fix a year’s contract without having to take a serious risk on the volatility of currency exchange rates or the oil price, for example. In the specific case of the bunker surcharge, the lines suggest that it is calculated under a “transparent formula” open to all for examination. But shippers feel totally different about any of the lines’ price fixing – and have suggested to FTW that the ASL application before the CC “doesn’t stand a snowball’s”. “We think that the SA-Europe conference is in violation of SA competition regulations on nine bases,” said one of the drivers of the shippers’ case. He also added that the European regulation 4056-86 (which allows certain port-to-port price-fixing) “is on the skids” – and that the lines’ request to retain fixing of surcharges should be rejected as “unjust enrichment”. It’s certainly true that shipping lines enjoy exemption in a lot of areas around the world – even though its future might be a bit shaky. But whether they will be able to justify retaining that exemption long-term is another matter. The next episode should be the SA Competition Commission’s findings.