Should Competition Board be investigating baf?

The shipping lines should be joined with airlines in the SA Competition Commission (CC) investigative probe into alleged price-fixing of fuel surcharges, according to Peter Newton, director of Seaboard and Cape Town port users’ spokesman. “By definition a surcharge is and should be of short duration,” he told FTW, “to be withdrawn or incorporated in the basic ocean freight at the next review.” However, he suggested that the shipping lines’ bunker adjustment factor (baf) was a more permanent feature, subject to up or down adjustments as the fuel price circumstances demanded. “The snag,” he added, “is that baf has been abused by ocean carriers and airlines alike as a major source of unjust enrichment – and is now attracting increasing attention of competition authorities around the world.” In support of his case, he highlighted the recent news, that the CC had referred eight air cargo carriers to its Competition Tribunal for alleged collusive behaviour that had endured from 1996 to 2006. The issue of baf in the liner shipping industry, however, remains unresolved, according to Newton, despite extensive efforts by shippers over recent years to have open discussions with the shipping bodies on what he described as the “unsatisfactory status” of baf. One such attempt was as long ago as 2006, when a port users’ delegation met with the then European Southern Africa Conference (Esac) – founded in 1883 and since rendered defunct with effect from October 16, 2008, when the EC regulation 4056/86 (block exemption) was repealed. “At our meeting in London in April, 2006,” Newton said, “they (Esac) gave us the run-around – and ultimately the big finger. “This when we attempted to persuade the conference and its members to engage in dialogue for a ‘fair, reasonable and fully transparent’ baf formula.” Given the sudden spark of interest at the CC in cargo transport modes and fuel surcharge price-fixing, “they (the line members of the then conference) may yet regret their bad faith/arrogance,” Newton added. “Government is scratching for revenue everywhere it can. And, properly prosecuted, this baf alone - never mind other spurious surcharges – should be worth a few hundred bar (millions).” He felt that it was probably only a matter of time before the SA Competition Commission turned its attention to liner shipping companies. “They have been in violation (apart from any other statutes or common law) of act 89/1998 (Competition Act) notwithstanding the EU block exemption which, until its repeal in October 2008, covered them from the European end – but not down here,” Newton said. “Repeated warnings of their violation of 89/1998 were treated with disdain and even scorn. Now, all the lines can do is vasbyt, and await the fate which may befall them. Unless, of course, someone decides to break ranks and claim whistleblower status – to hopefully qualify for leniency.”