The recent Notice to Users of the freight services of A.P. Moller–Maersk Group and its integrated services, which restricts access for international freight forwarders in many economies through shifts from contracted arrangement to spot rates, raises serious concerns as to significant changes in business practice and the long established lex mercator in the shipping industry. The freight forwarding industry, as a key organiser of service delivery across all modes of transport in door-to-door operations, are expected to be significantly disadvantaged, with shippers and consumers being ultimately worst hit.
Such practices are considered to amount to market domination and competitive distortions, which have been made possible by way of governmental tax reliefs and subsidies to shipping lines in a variety of jurisdictions. Dramatic changes have already taken place in the number of shipping lines providing service offerings for the international movement of goods by sea, with mergers and acquisitions over the past two decades seeing consolidation into a handful of dominant shipping lines who have furthered that dominance by forming key alliances. These lines, and alliances, have also set out to vertically integrate services through the acquisition of terminal handling operations, national and international freight forwarding entities. In most economies, regulators have been slow to take action on the anti-competitive aspects of these mergers or alliances in the provision of international trade logistics, as well as the impact on consumer prices at a time of significant fiscal constraint.
“These changed arrangements, which have been accelerated and facilitated by the pandemic, have resulted in significant unanticipated profits by these “few” and their ability to determine the viability of others offering freight services in a now highly disrupted and volatile marketplace. Their integration allows them to make price differentiation which impacts free market competition. It is highly regrettable that these profits are not better used to invest in decarbonization and a more sustainable maritime industry” said Dr Stéphane Graber, FIATA Director General.
FIATA, in its representation of international freight forwarders, of which small and medium sized enterprises (SMEs) form a significant part, welcomes the work being undertaken by the U.S. Federal Maritime Commission and the Australian Productivity Commission to publicly look into these evolving business arrangements. FIATA urges other economies to follow suit and address any implications as regards their international commitments through the World Trade Organization, including the European Commission as regards its Consortia Block Exemption.
“The protection afforded to shipping lines under a variety of economies’ antitrust/anticompetitive legislation is now, in reality, a relic of the past and must now be questioned in all jurisdictions as to shipping line marketplace domination, competitive neutrality and price setting,” Dr Graber commented.
The increased cost of doing business with service providers of sea carriage has delivered unimaginable profits to those in dominant market positions, whilst having a detrimental impact on SME shippers, which are in many cases significant employers and economic contributors in many countries around the world. FIATA notes with concern the impact of the logistics process on the U.S. Consumer Price Index, which in 2021 was one of the highest for over 30 years. Other economies are now similarly affected.
FIATA supports free market competition, which it does not believe can fully take place in a marketplace dominated by select service suppliers. To address this issue, FIATA will continue to work collaboratively with other international, regional and national bodies representing service providers in international trade logistics and supply chain management in all modes of transport, covering the first, or last mile, of delivery.
CLECAT voiced similar views on this subject toward the close of December 2021, which can be reviewed by clicking here.
FIATA are the International Federation of Freight Forwarders' Associations and global voice of the Freight Forwarding industry.
IIFA is Ireland's National Association Member of FIATA.