U.S. Drops Container Shipping Cartel Investigation Without Charges

  • 27-Feb-2019
  • U.S. Drops Container Shipping Cartel Investigation Without Charges

The U.S. Justice Department has closed a two-year investigation into allegations of price fixing by some of the world’s biggest container shipping lines without filing charges or imposing fines, according to the companies.

Several carriers told The Wall Street Journal that the Justice Department had informed them the probe that began in early 2017 was closed. The antitrust investigation became public in March 2017 when federal agents walked into a meeting of the industry’s 20 biggest companies, gathering under what executives called the “Box Club,” and gave subpoenas to top executives at several companies.

“We are pleased to confirm that the DOJ has closed its investigation into containerized shipping and has released Maersk from any obligations under the Grand Jury subpoenas issued during the March 2017 meeting of the International Council of Containership Operators,” Denmark’s A.P. Moller-Maersk A/S, the industry’s largest operator of container ships by capacity, said in a statement.

Switzerland-based Mediterranean Shipping Co., the No. 2 carrier behind Maersk, said in a separate statement that it is pleased to “move forward” now that the “global container industry has been fully investigated and exonerated.”

The Justice Department didn’t immediately respond to requests for comment.

The probe was among several investigations by global regulators into possible price fixing as the largest container shipping lines grouped into three major alliances, sharing port calls and vessels as part of a broader consolidation in the sector in an effort to save billions in annual operating costs.

The container shipping alliances kicked off operations in mid-2017 and together handle about 90% of all manufactured goods across the world’s major trade routes. A wave of consolidation across the container industry over the past three years has cut the world’s top dozen operators by about half, prompting concerns that companies will raise prices for their industrial shipping customers because of diminished competition.

European regulators are studying the exemption from some antitrust restrictions that allow carriers to operate there under their alliance agreements. Groups representing shipping customers have argued the so-called block exemption should be repealed, while shipping lines say their operating pacts provide lower costs and greater efficiency.

Container line executives said any big penalties by the U.S. Justice Department could have crippled smaller operators struggling with low freight rates and falling demand from slowing global trade.

“We are all relieved,” said the chief executive of another European player, who asked not to be named. “The last thing we needed was paying up multimillion-dollar fines to the DOJ while we struggle to stay above water.”

Freight rates on the Asia-to-Europe trade lane, the world’s busiest shipping route, averaged below $900 per 20-foot container over the past 12 months, according to the Shanghai Containerized Freight Index. Operators say anything below $1,400 per box on the route is unsustainable.

There is about 15% more shipping capacity than demand on most trade routes, according to brokers and shipping executives. Vessel operators also face tens of billions of dollars in costs to comply with lower-emissions regulations coming into effect in January next year.

Watchdogs in the U.S., European Union, China, Australia and South Africa routinely launch investigations on antitrust suspicions. Many such probes end without prosecutions.

The European Commission in February 2018 fined several car-carrying shipping companies and automotive parts suppliers a total of more than $600 million for anticompetitive behavior. The U.S. between 2014 and 2016 fined several car carriers tens of millions in a separate antitrust investigation into international automobile transport.

Source :- Wsj.com

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