A report released Tuesday by the International Transport Forum (ITF) suggests that government regulators must broaden their reach deeper into international maritime shipping to ensure fair competition and better monitoring of the industry.
In their recent report, titled Performance of Maritime Logistics, the ITF evaluates the various disruptions that have had the global supply chain repeatedly making the headline news.
“Governments should build up their capacity to monitor competition in maritime transport,” the report noted. “The role of specialized agencies should be strengthened. Competition authorities should enhance cross-border cooperation.”
As an autonomous entity within the Organization for Economic Cooperation and Development (OECD), the ITF has long believed that the current regulatory arrangements for container shipping is not enough and has not resulted in price stability, reasonable rates, or fair competition and therefore should be reviewed.
“Regulators have allowed carriers to use cooperation arrangements to jointly manage fleet capacity,” the ITF report said. “This option has become the main element of coordination between shipping lines following regulatory initiatives in the European Union and the United States in the early 2000s to prohibit joint price-fixing in shipping conferences. Expectations that this intervention would stimulate price competition and lower shipping prices were confounded, however, by the record-high freight rates since 2020.”
World Shipping Council’s Rebuttal
John Butler, the president and CEO of the World Shipping Council (WSC) responded to the ITF report dismissing the reports findings that suggest the container carriers are to blame for the high shipping rates.
One of the issues Butler takes exception to, is the ITF’s assertion that carriers are colluding together to manage fleet capacity which in turn raises the spot rates. Butler insists that the ocean carriers are working within competition laws, saying that the laws allow carriers to work in cooperation arrangements to joint manage fleet capacity.
“The authors assume that parties that are part of a consortium no longer compete with each other. That assumption is simply wrong, as regulators have repeatedly explained,” he said. “Liner shipping is a very closely monitored industry, and regulators are quite naturally asking questions about the current disruptions. Carriers have answered and will continue to answer those questions. But the fact is that ocean carriers actively compete against one another in the global marketplace.”
Butler also pointed out the two-year investigation lead by the Federal Maritime Commission (FMC) has concluded that there was no evidence of collusion and that there is “vigorous” competition in the container shipping market.
ITF Eyeing Vertical Integration Moves
Another area the ITF report covers is vertical integration moves by carriers who are particularly flush with spending money after a highly lucrative last two years. In 2020, the ten largest container carriers recorded a combined profit of $17 billion and $160 billion in 2021. If the first half of COSCO Shipping’s reported profits this year are correct, then carriers are on course to exceed these numbers in 2022.
A few carriers have used their profits to acquire logistics and forwarding companies, to which the ITF recommended that governments pay more attention to fair competition within the container logistics industry.
“The ongoing vertical integration of the container shipping industry poses new challenges for competition regulation,” the report noted. “Shipping companies can use their exemptions from competition law in many jurisdictions and their leverage as carriers to acquire competitive advantages in markets where they now directly compete with freight forwarders, port service providers, or logistics operators that do not have such competition law exemptions.”
Regardless of the outcome from the ITF’s report, rest assured knowing that ClearFreight is ready to help you make the most out of your supply chain. Contact our team today to hear how our specialized supply chain solutions and decades of experience can help make logistics easier for you.