A group of international competition authorities with access to global intelligence networks have formed a working group to investigate and possibly prosecute suspected anticompetitive behavior and collusion within the global supply chain.
The competition authorities group consists of the United States, United Kingdom, Canada, Australia, and New Zealand are known as the “five eyes” of global intelligence. The group plans to cast a wide net across the world’s severely fractured supply chains in search of breaches within the law. Jonathan Kanter, assistant attorney general for the US Department of Justice’s antitrust division recently said in a statement, “Temporary supply chain disruptions should not be allowed to conceal illegal conduct,”. Kanter later explained that the antitrust division will not allow companies to collude to overcharge consumers and blame it on supply chain disruptions. Kanter’s statements were supported by other authorities within the Five Eyes group, all vowing to crack down on anyone using the global disruptions to violate competition laws.
None of the statements made by the five competition regulators mentioned any specific container shipping lines but during the last 18 months they have gathered many complaints and evidence from customers regarding exorbitant fees and unreliable service levels. So much so that the European Association for Forwarding, Transport, Logistics, and Customs Services (CLECAT) has called for an urgent investigation.
Nicolette van Jagt, the director general of CLECAT recently said in a statement, “The profiteering of ocean shipping carriers resulting from their capacity management strategy allowed them to acquire the market power and financial war chest that they are now using to vertically integrate, increase rates, and drive out independent freight forwarders in the downstream market”.
Ocean Carriers Cherry Picking High-Volume Shippers
CLECAT is accusing carriers of “cherry picking” the highest volume shippers for long term contracts and offering others spot rates, where they will pay much more than the selected few that were awarded the contracts.
“New discriminatory conduct towards freight forwarders, the key organizer of service delivery across all modes of transport in door-to-door operations, will ultimately disadvantage shippers and end consumers because of restricted choice in services and higher rates,” Van der Jagt added.
Paul Zalai, director of Australia’s Freight and Trade Alliance, said that foreign-owned shipping lines are boasting multibillion-dollar profits which they plan to use to make strategic investments in vertically integrating their supply chains. According to Zalai, some carriers are refusing to negotiate contracts with third party forwards, “leaving exporters and importers at their mercy as price takers”
FBI Promises to Prioritize Supply Chain Investigations
The United State’s Federal Bureau of Investigation (FBI) has recently acknowledged that the ongoing challenges of supply chain disruptions have created an opportunity for criminals to fix prices and overcharge customers. In an effort to comply with the US antitrust laws, the FBI’s antitrust division is prioritizing existing cases where competitors may be using supply chain disruptions to garner illicit profits.
The global pandemic has created an ongoing disruption for container shipping and domestic logistics, with sustained demand causing capacity and equipment shortages. Severe port congestion issues have also left many ports dragging schedule reliability to record lows. Despite the dismal levels of service provided by carriers, contract and spot rate levels have soared, leading to never-before-seen profitability for the container shipping industry.
Many carriers have posted profits well over three hundred percent over what they reported the year before. Global bank HSBC’s forecast that container carriers will earn a collective operating profit of one hundred sixty-three billion dollars, which is significantly better than the twenty-four billion in 2020.
These supply chain disruptions have been particularly costly for shippers, and many have been searching for ways to save money. One effective way of cutting costs is to partner up with a reliable logistics partner, like ClearFreight, to manage your supply chain. Our expert team can help you find the best rates for your shipments and offer the best solutions to navigate through these disruptions. Contact us today to learn how our supply chain solutions can help make logistics easier for you.