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A five – month grace period is provided by the EU Commission to container liner shipping companies, in order to make the commitments offered by 14 companies legally binding.
It was on 16 February 2016 when the European Commission invited interested parties to comment on the commitments to address concerns relating to concerted practices. Fiva months later, the Commission accepts these proposals.
“Competitive shipping services are essential for European companies and for the EU’s economy as a whole. The commitments offered by 14 carriers will make prices for these services more transparent and increase competition,” suggests EU Commissioner on Competition, Margrethe Vestager, as container shipping corresponds to the majority of the non-bulk freight carried by sea to and from Europe.
At the moment, more than half of EU imports and exports are carried by sea, of which around 40% is shipped in containers. 14 of those container liner shipping carriers have regularly announced their intended future increases of freight prices also known as General Rate Increases or (GRI), on their websites, via the press, or in other ways.
The carrier companies are CMA CGM (France), COSCO (China), Evergreen (Taiwan), Hamburg Süd (Germany), Hanjin (South Korea), Hapag Lloyd (Germany), HMM (South Korea), Maersk (Denmark), MOL (Japan), MSC (Switzerland), NYK (Japan), OOCL (Hong Kong), UASC (UAE) and ZIM (Israel).
The China Shipping company, based in China is practically off the market but was one of the companies intending to increase freight prices, according to February’s announcement by the EU Commission. After February the company was restructured and therefore exited the market. The company refused to comment.
By announcing future price increases, the companies made it possible to reduce the level of uncertainty about their pricing behaviour and decrease their incentives to compete against each other. However, this led to higher prices and harmed competition, in breach of EU and European Economic Area (EEA) competition rules’ ban on concerted practices between companies (Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article 53 of the EEA Agreement), as the EU Commission suggests.
After February’s feedback request, the EU Commission published on Thursday a series of commitments, to be applicable in five months time, in order to provide enough time to the companies to adjust their client services to the new levels of transparency that will be required.
As from 7 December 2016, the carriers will stop publishing and communicating General Rate Increase announcements, such as changes to prices expressed solely as an amount or percentage of the change.
In order for any future price announcements to be useful for customers, the carriers will announce figures that include at least the five main elements of the total price, making price announcements binding on the carriers as maximum prices for the announced period of validity. Price announcements will not be made more than 31 days before their entry into force.
The commitments above will not apply to communications with purchasers who already have an existing rate agreement in force on the route to which the communication refers and communications during bilateral negotiations or communications tailored to the needs of specifically identified purchasers.
The EU Commission is providing an extra five months to the carriers by not making the decision legally binding immediately, even if the carriers’ practices are considered to be harmful for competition.
According to EU sources, five months are not considered to be a long time, as the date agreed will allow to the carriers to smoothly adjust their practices without causing frustration to clients and personnel.
The post EU Commission gives container liner shipping carriers a five-month grace period to stop breaching EU competition rules appeared first on New Europe.