The British International Freight Association (BIFA) has written to the government of the United Kingdom, asking it to investigate the state of competition within the current deep-sea container shipping market, claiming that it is unfairly distorted.
More specifically, the UK’s main trade association for freight forwarding and logistics companies is concerned that certain practices undertaken by the major container shipping lines, as well as easements and exemptions provided to them under competition law, are distorting the operations of the free market to the detriment of international trade.
In a letter to a member of parliament, Robert Courts, parliamentary under-secretary of UK at the Department for Transport, BIFA’s director-general, Robert Keen, expressed the trade association’s concern that during a period of well-documented chaos within the container shipping sector, commercial power is becoming increasingly concentrated, resulting in diminished market choice and competition, as well as in distorted market conditions.
“BIFA members fully accept that a free market economy is open to all, but are increasingly concerned that the activities of the container shipping lines, and the exemptions from legislation from which they benefit, are distorting the operations of that market to the shipping lines’ advantage, whilst adversely and unfairly affecting their customers, especially freight forwarders and small and medium-sized enterprises (SMEs),” noted Keen.
“The facts speak for themselves,” pointed out Keen, who added, “during a period that has seen European Union (EU) block exemption regulations carried forward into UK law, there has been huge market consolidation.”
According to Keen, in 2015, there were 27 major container shipping lines carrying global containerised trade, with the largest having a 15.3% market share.
“Today, there are 15 shipping lines, organised into three major alliances (2M Alliance, Ocean Alliance and THE Alliance) carrying that trade, with some analysts observing that the market share of a single alliance on certain key routes could be over 40%,” said Keen.
“The pandemic has highlighted and accelerated this development, which has also contributed to dreadful service levels, and hugely inflated rates, with carriers allocating vessels to the most profitable routes with little regard to the needs of their customers,” he highlighted.
Moreover, Drewry recently issued a profit forecast of more than US$150 billion for 2021 for the main container shipping lines for which financial results are available.
“To put that into perspective, this is more than has been achieved in the previous 20 years combined, and many BIFA members consider it to be a case of blatant profiteering,” concluded Keen in its letter to the UK government, on behalf of the trade association.
BIFA is joining a growing number of organisations in calling for governments at a national and pan-national level to give careful consideration to the evolving business arrangements in the container shipping market to see whether they are in breach of competition law.
Author: Vivi Dara