November 27 - The European Shippers' Council (ESC) says it believes the formation of container shipping line alliances is a risky development for a free market for transportation of goods by sea, which is not good for clients of the carriers, shippers, an
It is calling for competition authorities to impose strict conditions on the operation of the alliances.
The ESC says that in the last year there has been a global move towards more consolidation in the maritime container market, with world trade now facing a market dominated by four major alliances that represent more than 95 percent of the total container vessel capacity worldwide. It adds that shipowners have been pushed into this rationalisation to limit costs and reach economies of scales with ever larger ships and enhanced cooperation.
It adds that all these alliances are reaching a critical point now (only CKYHE is still under scrutiny of the Federal Maritime Commission (FMC)) and they will be allowed to operate without strict or even any control at all.
It warns that: "Too much market share in too few hands will lead to an oligopoly where the service quality will be endangered. Shipowners will be of course tempted to rationalise even more services to save more money and increase revenues. Extremism in rationalisation will take the form of the reduction of number of direct calls, reduction of the number of services, increase of prices, etc."
The FMC, through Commissioner Lidinsky, has also acknowledged the potential competition threat of such a situation and is supporting the organisation of a global summit on competition, with competition authorities from the USA, China and Europe.
The ESC says it welcomes this opportunity to deal with this global concern at the correct level with more involved competition authorities.
To prepare this summit, and to be able to promote its position, ESC will meet DG COMP and present its plan for the creation of a monitoring system for alliances. Americans and Asian shippers' councils will be of course encouraged to take the same approach towards their national competition authorities.
As an example, the ESC says it is willing to see monthly capacity, actual filling rates and monthly average revenue per teu tracked by competition watchdogs. Furthermore, a strict monitoring of freight rates modification following capacity changes has to be created. Additionally, there is need for an advance notification system so that customers stop suffering last minute cancellation of calls, departures or bookings.