Can Legal Action Reverse The Rise In Container Shipping Rates?

UK – DENMARK – FAR EAST – Just last week we pointed out the irony of air cargo carriers and air freight forwarders being embroiled in anti trust suits right across the world whilst container shipping lines, immune to such legislation, continued to boost rates. This after a terribly bleak period of falling traffic levels and attempts to staunch the flow of blood with shrinking tariffs, especially to high volume, long term contract customers.

Now it seems that the policy of raising rates accepted meekly or otherwise by clients, may have a sting in the tail in a case which may prove decisive. In the two opponents we have two of the very largest players in their own markets. On one side AP Moller Maersk, owners of Maersk Line, the largest container shipping line in the world, on the other Argos, the UK retail chain and part of the giant Home Retail Group Empire.

The case against Maersk is simple, Argos maintain that the freight rates they agreed to import their goods from the Far East for the next two years were a fixed and invariable contract with a price of $930 per 40 foot box covering the movement of 5,000 containers in the period. The rate then quoted by Maersk rose threefold to $2730 per container, a jump to cause the most hardened and sceptical freight professional a double take. Maersk no doubt will hold that the price was not guaranteed, just as presumably they will claim Argos didn’t guarantee to use all 5,000 boxes.

Trouble is we don’t know what either of them will actually say as so far both organisations have declined to comment on the matter. What we do know is that many people will be watching the case with great interest. According to Court documents Argos replaced the agreement after they say Maersk reneged, and took out a fixed price space protection with an alternative carrier, namely Kuehne and Nagel. This replacement contract they say will cost them an excess payment of almost $14 million, money they want back from Maersk.

As anyone in the trade will know those boxes won’t be on any ships bearing the Kuehne and Nagel flag proudly on her funnel, the most likely company to move the bulk of these orders will of course be – Maersk Line. The point to watch is of course who blinks first, if the case goes to Court look forward to a long and bitter battle, the decision will hinge on precisely the terms written into any contract and whether the Court accepts any get out clauses no doubt forming part of the agreement.

So Argos and Maersk fall out, K and N pick up the baton, slip it to Maersk in exchange for the inflated rate which they admit privately they have accepted meekly in the past, passing on the rate (presumably plus a profit) to Argos. This should be one to watch.