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European Commission accepts price transparency commitments by container liner shipping companies

The European Commission has accepted commitments made by 14 container shipping companies to increase price transparency and reduce the likelihood of coordinating prices. 08 Jul 2016

The shipping companies currently announce price increases, known as general rate increases (GRI), on their websites. GRI do not give the final price for the service but only an indication of how much the company expects the price to rise.

GRI announcements are usually made three to five weeks before their implementation date, and can be changed at any time. This makes it easier for the companies to align their prices, the Commission said.

This system does not give full information to customers, and also makes it possible to coordinate prices without the risk of losing customers. This is likely to lead to higher prices, and harm competition, it said.

The shipping companies have therefore agreed to stop publishing GRI announcements. When publishing any future price announcements they will give at least five elements of the total price: base rate, bunker (fuel) charges, security charges, terminal handling charges and peak season charges if these apply.

The amounts specified in price announcements will be binding as maximum prices, although the companies can offer lower prices.

Announcements will not be made more than 31 days before the prices come into force. This corresponds to the period when customers usually start booking in significant volumes, the Commission said.

Two exemptions have been built into the change: 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.

After carrying out a market test of the commitments, the Commission said it was satisfied that they address its concerns. "They will increase price transparency for customers and reduce the likelihood of concerted price signalling by binding the carriers to the prices announced," it said.

The commitments will be legally binding for a period of three years starting from 7 December 2016.

Commissioner in charge of competition policy, Margrethe Vestager, said: "Container shipping accounts for the vast majority of the non-bulk freight carried by sea to and from Europe. 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".

Competition law expert Neale McDonald of Pinsent Masons, the law firm behind Out-Law.com, said: "The Commission's acceptance of the commitments proposed in February reaffirms that price announcements must ultimately be made for the benefit of customers, not competitors. It will be interesting to see the full non-confidential commitments decision in this case once it is released. While it may not be as instructive as a prohibition decision would have been, it could still contain helpful guidance on the antitrust implications of price-signalling practices."