Brussels Launches Price Investigation
In recent times, there has been controversy over the prices charged by a number of shipping companies, and it would seem that the European Union is concerned – so much so that a formal probe has now been launched.
The problem for the many businesses who routinely use cargo shipping companies is that many of these companies grouped together to increase prices in harmony. They did this in the form of public statements and the European Commission has described the movements as “concerted practices”.
Discussing the matter, the EC said “since 2009, these companies have been making regular public announcements of price increase intentions through press releases on their websites and in the specialised trade press. The practice may allow the companies to signal future price intentions to each other and may harm competition and customers by raising prices on the market for container liner shipping transport services on routes to and from Europe”.
For the many customers who rely upon ocean freight shipping as part of their business needs, the news of a large investigation has positive and negative consequences. In the positive corner, there is the idea that a more regulated industry will help see prices settle. However, others feel that scrutiny of the industry could bring in more red tape and bureaucracy in an industry they feel has enough already. Additional regulations could mean more delays for them and this could harm their business.
At the moment, there are ten companies under scrutiny, and the practices they are being investigated for have been in place since 2008 when the previous industry practice of fixed prices and capacities was banned by Brussels. As a result, many companies were put out of business or continued to run at a loss. However, whilst this solved a myriad of problems for many of the businesses who hire shipping companies, analysts have pointed out that it has done little to help the situation of those companies who cannot improve their situation due to ongoing price wars.
“Irrespective of the GRI mechanism, the volatility in prices on the Asia to Europe trade does not appear to be linked to supply and demand fundamentals. Rather it is driven by the perennial battle between companies for market share,” said Neil Dekker, an analyst at Drewry.