2014 Was the Year for Container Freight Agreements - And Profitable for the Regulators

WORLDWIDE – 2014 will be remembered as the year of the container shipping alliance, with most of the major box carriers involving themselves in agreements of one sort or another with direct competitors in an attempt to rationalise schedules and employ tactics utilising economies of scale. Some pushed the envelope too far, the ill-fated P3 which was to see the world’s top three freight container lines join together to share capacity under a single management office, was a step too far for the Chinese regulators in what many felt was simply a protectionist move.

Not to be beaten two of the P3 partners, Maersk and MSC, went on to form the 2M vessel sharing agreement which seemed to satisfy all global regulators affected, with the codicil that all will keep a watching brief. Meanwhile we have seen the third P3 member, CMA CGM, tie up with three major Asian carriers, and form Ocean Three with China Shipping Container Lines (CSCL) and United Arab Shipping Company (UASC). Hapag Lloyd and Compañia Sud Americana de Vapores (CSAV) have now merged to form the world’s fourth largest container shipping group whilst earlier in the year the G6 grouping received approval to trade and five Asian carriers sign up as the CKYHE Alliance.

Not everybody of course is happy about the way things are going and see danger in the undergrowth. Whilst recognising the undoubted advantages the agreement could offer the Global Shippers' Forum (GSF) was vociferous in its criticism of P3 and asked some serious questions of US regulators way back in October and November 2013 before concluding its campaign in March of this year. Now the GSF has welcomed the news that the EU’s Commissioner for Competition, Margrethe Vestager, will be keeping a ‘close eye’ on the mega-alliances in the container industry. GSF Secretary General, Chris Welsh commented:

"GSF welcomes the news that the Commissioner for Competition, Margrethe Vestager is to monitor the new mega-alliances more closely, and fully supports her decision to do so. Effective monitoring of such alliances is absolutely essential to ensure they are compliant with the general provisions of the EU competition rules.”

The newly appointed Commissioner has asked for information to be passed to her office if shippers and other stakeholders spot ‘anything amiss’. GSF reports that Ms Vestager says she will monitor 2M closely and in a strongly worded statement claims she has said she will ‘strike’ against 2M or one of the other major alliances if they were to interfere with free competition.

Given the EU’s propensity of late, together with the appointed antitrust authorities around the world, to discover collusion right throughout the freight industry (enter cartel into the News Search box to be swamped by examples), the new alliance had best ensure they have all their terms and agreements rubber stamped by all authorities concerned. The line between cooperation and collusion is a fine one, in the logistics game the equivalent of the offside rule, and for the regulators, 2014 was the year in which fines for a flag in the air produced billions in unforeseen profit.