December 3 - According to maritime research agency, Drewry, the outcome of the European Commision's (EC) latest accusation of price fixing against ocean carriers is unclear and the case is unlikely to be resolved quickly.
Although the EC clearly wants to quash the danger of ocean carriers using general rate increase (GRI) announcements to signal pricing strategy to competitors, the conclusion to its formal antitrust proceedings brought against several shipping lines last week is still not clear.
Ocean carriers will argue that they are simply doing what they have always done by notifying customers of future price increases, which was a statutory requirement for conference carriers under the old UNCTAD code.
The EC can argue that since the historical practice of announcing GRIs started, the lack of financial justification for them has become more evident, suggesting that targeted increases now being implemented are only motivated by supply and demand, so should be less orchestrated.
The ocean carrier practice of openly publishing GRIs is not new, but rather the scale and intention of it might have changed. In recent cases, shipping lines have announced GRIs, then amended their levels in light of bigger increases subsequently publicised by competitors.
The EC can point to its revised guidelines on horizontal cooperation agreements issued in May, 2011, claiming that ocean carriers were warned against price signalling over two years ago and have chosen to ignore it.
The problem with this is that the EC's guidance was issued at the same time as the dawn raids made on several ocean carrier offices in Europe, but the way that these lines have since escalated the use of GRIs might have tipped the balance in favour of further legal action.
Thus it is hard to see the EC's legal case against ocean carriers' GRI intentions being quickly concluded - regulators outside of Europe do not yet seem to see the need for change, and given past precedent, ocean carriers will surely want to appeal against any adverse ruling.
Were the EC to table evidence of lines actually conferring over GRI levels, or deliberately orchestrating price increases via GRIs, much more would be at stake, with the commission allowed to issue fines up to a maximum of ten percent of a company's revenue for antitrust activity.
The legal proceedings are badly timed for the P3 alliance, since Maersk, MSC and CMA CGM need to be seen as responsible carriers in the eyes of industry regulators.