Shipping firms to face fines

Date: 04/06/1998

By Chris Johnstone

COMPETITION Commissioner Karel van Miert has lined up European governments behind his plans to punish some of the world's biggest shipping companies for operating an alleged pricing cartel.

National competition authorities, meeting to discuss the issue for the first time last week, supported Van Miert's claims that firms involved in the Trans-Atlantic Conference Agreement (TACA) broke competition rules by setting rates for the landward part of freight journeys.

A second meeting of national experts will take place on 15 June, with Van Miert still seeking agreement on the key issue of the scale of fines to be levied on the companies.

The Commissioner believes the seriousness of the price collusion and the length of time it went on should justify high fines. "That is the main reason for this second session," said an official source.

Some of the EU's major maritime countries - Denmark, Germany and the UK - are worried about the impact of heavy fines on their shipping companies, according to Philip Ruttley, a competition and shipping lawyer with Garretts, London, and close follower of conference cases.

Denmark's AP-Moller-Maersk Line, Hapag-Lloyd Container Linie of Germany and Anglo-Dutch P&O Nedlloyd are among the leading European members of TACA. More than a dozen other shipping firms, mostly far-eastern but including Swedish, Polish, Latin American and US members, complete the conference.

Support from the advisory committee on competition is a prerequisite for Van Miert to push ahead with the TACA case and pave the way for a decision in his favour when he takes it to the full Commission next month.

Competition officials equate the behaviour of the shipping companies with that of Volkswagen when it tried to prevent cross-border car purchases in Italy. In January, the Commission fined the firm 102 million ecu, a record punishment for one company.

Van Miert and his competition officials have conducted a four-year campaign to bring TACA's members to book. Last year, angered by the stalling tactics of shipping company lawyers, he warned that the firms concerned faced heavy fines and said attempts to find fresh legal grounds to delay action would only increase the final punishment.

But lawyers question how quickly the Commission might get its hands on any fines.

Shipping companies are likely to invoke a European Court of Justice injunction preventing the Commission from taking any action against their agreement on freight pricing and capacity before the Court gives a final decision on its legality. That ruling is now expected next year.

"It might be argued that a Commission move to impose a fine might constitute a contempt of court," said Ruttley.

TACA members had a market share of around 60% on all transatlantic maritime freight when Van Miert's investigation began.

They attracted Commission anger after widening their binding cooperation on freight rates and capacity on seaward journeys - for which they were granted an exemption from Commission competition rules - to landward legs.

The TACA conference and its predecessor, the Trans-Atlantic Alliance, had already attracted attention after shippers of goods objected to overnight hikes in freight rates and European exporters complained they were being priced out of US markets with nowhere to turn for alternative transport.

The shipping companies argue that cooperation was necessary to prevent their business sinking altogether because of fierce competition on freight rates.