Container shipping: Commitments on price transparency

European Commission declared the commitments legally binding offered by fourteen container liner shipping companies to increase price transparency

Container shipping: Commitments on price transparency

The European Commission has adopted a decision that renders legally binding the commitments offered by fourteen container liner shipping companies in February 2016, for a period of three years starting from 7 December 2016. The commitments are aimed to increase price transparency for customers and to reduce the likelihood of coordinating prices.

More than half of EU imports and exports are carried by sea, of which around 40% is shipped in containers. Commissioner in charge of competition policy, Margrethe Vestager, said: “Competitive shipping services are therefore 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”.

Fourteen container liner shipping companies have regularly announced their intended future increases of freight prices. These carriers 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).

These price announcements do not indicate the fixed final price for the service concerned, but only the amount of the increase in USD per transported TEU. The Commission had concerns that these announcements do not provide full information on new prices to customers but merely allow carriers to be aware of each other’s pricing intentions and may make it possible for them to coordinate their actions.

The carriers’ commitments:

the carriers will stop publishing and communicating General Rate Increase announcements, i.e. 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 (base rate, bunker charges, security charges, terminal handling charges and peak season charges if applicable)

price announcements will be binding on the carriers as maximum prices for the announced period of validity (but carriers will remain free to offer prices below these ceilings)

price announcements will not be made more than 31 days before their entry into force, which corresponds to the period when customers usually start booking in significant volumes (typically, customers plan their shipments between 4 weeks and 1 week before they need to move their consignments)

The commitments do not apply to:

a)   communications with clients who already have an existing rate agreement in force on the route to which the communication refers

b)   communications during bilateral negotiations or communications tailored to the needs of specific identified clients.