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Consultation launched on shipping companies' price publication commitments

The European Commission has asked for feedback on a proposed change to the way that container liner shipping companies publish planned price increases.17 Feb 2016

Fifteen shipping companies have committed to change the way they publicly announce planned rate increases.

Prices will now be announced no more than 31 days before the price will come into force, which is usually when customers start booking in significant volumes, and will be broken down into five elements: base rate; bunker (fuel) charges; security charges; terminal handling charges; and peak season charges if these are applicable, the Commission said.

Once announced, the carriers will not be able to increase their price over the period they have announced, although they will be free to cut prices below that level, the Commission said.  

Two exemptions have been built into the proposal: the commitment will not apply when companies are communicating with buyers who already have an existing rate agreement in place for the route, or during negotiation or communication with specific identified customers. These are unlikely to cause competition concerns, the Commission said.

The Commission is now looking for feedback on these commitments.

The Commission opened formal antitrust proceedings to look at the practice of publicly announcing general rate increase intentions in November 2013. If feedback on the proposed commitments suggests that they are enough to resolve its concerns, the Commission may make these legally binding on the carriers and end its investigation. Any company breaking the commitment could then be fined up to 10% of its annual turnover, it said.

The container liner shipping companies' practice of publishing their planned price increase intentions could harm competition and customers by raising prices, in breach of EU antitrust rules, the Commission said.

The price announcements, known as general rate increases, did not give a fixed final price, but only the amount of the planned increase in US dollars per twenty-foot equivalent unit (TEU) for a trade route, with a planned date when the price would come into force.

The announcements were typically made some three to five weeks before coming into force, and it was evident that other carriers would often follow suit with similar increases for the same date, the Commission said.

"The Commission has concerns that general rate increase announcements may not provide full information on new prices to customers but merely allow carriers to explore each other's pricing intentions and coordinate their behaviour. Such conduct would breach EU and European Economic Area competition rules' ban on concerted practices between companies," it said.

Competition law expert Neale McDonald of Pinsent Masons, the law firm behind, said: "Price-signalling is commonplace in many industries, so this case has been on the radar of businesses across a wide variety of sectors."

"Had it resulted in a formal decision instead of commitments, we may have received a more detailed steer as to the Commission's view of the precise competition law implications of this practice, which are not particularly well-understood at the moment," McDonald said.

"Looking at the proposed commitments, what is clear is that they are intended to ensure that the benefits of price-signalling are adequately passed through to customers. They require price information announcements to be expressed in a manner clearly intelligible to customers, and to be released to coincide with times when customers in the relevant market typically conduct research and place orders in significant volumes. This should hinder companies from taking advantage of markets characterised by high transparency to sign-post their pricing practices to competitors – which creates scope for concertation," he said.