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No Urgency On Shipping Collusion - Ministry

The Importers Institute reported earlier that executives from six shipping companies met and colluded to rig prices. The result was a substantial price increase of more than $700 on each 20 ft container imported from the U.S. from 1 April.

Price-rigging is illegal under the Commerce Act. The actions of these companies' executives would probably land them in jail, if they worked in any other industry. International shipping, however, is exempt from the anti-competitive provisions of the Commerce Act.

We called on the Minister of Commerce, Paul Swain, to abolish that exemption.

A spokeswoman for Commerce Minister Paul Swain was reported in the New Zealand Herald today as saying that the issue of price collusion among shipping companies is not on the urgent list for review.

The European Union appears to have no such dispensation. The European Commission fined shipping companies caught colluding to rig prices in the transatlantic trade. The fines exceeded $550 million.

The Shipping Gazette reported that two un-named shipping companies said they had forwarded our allegations overseas with a possible view to taking legal action. We are shaking in our boots.

The following is a copy of the article published today (27 March 2000) in the New Zealand Herald

Shipping 'collusion' draws broadside By ROB O'NEILL

Retailers have joined importers in calling for a review of the conference shipping system, under which separate carriers meet to set rates and service levels.

Barry Halberg, from the Retail Trade Association, has supported Importers Institute head Daniel Silva, who has fired a warning shot across the bows of the shipping industry for what he described as price "collusion."

"That issue, I believe would be of concern to the retail sector as well, simply because of the volume of merchandise now being imported," Mr Halberg said. "My own view is the review of the Commerce Act this year should include the point Daniel has raised. Why should shipping companies be exempt from the coverage of that legislation?"

Mr Halberg said the Retail Trade Association believed in a free and competitive marketplace. Retailers were not allowed to collude on prices or arrangements, so why should shipping companies be allowed to. Ten days ago, Mr Silva issued an e-mail in which he said shipping executives from six shipping lines met and "colluded to rig prices," after the lines advertised price rises for container traffic from the United States to New Zealand in the Shipping Gazette.

He said this action would land executives from any other industry in jail.

Australia-New Zealand Direct Line general manager John Pascoe pointed out that the increases were made under US shipping laws, not New Zealand law. They were part of a global trend of rate recovery.

The managing director of Columbus Line New Zealand, Greg Wilson, said he found Mr Silva's allegations "unpalatable and ill-informed."

"Governments around the world have looked into it and found there is a need to allow carriers to get together and discuss service levels and pricing," he said. "New Zealand isn't any different."

In the past 12 to 18 months rates had fallen 20 per cent, he said. Carriers were not making a normal rate of return on a capital-intensive business.

"The rates had to move up so carriers could make investment decisions."

The issue is also one of sovereignty. Export rates and conditions are set by conference arrangements under New Zealand law.

Therefore, exports, not imports, would be affected by a change in the Commerce Act's exemptions.

Any review of the freight costs of inbound traffic would have to be instigated by the government of the exporting nation.

Mr Halberg, however, said consumers were getting a much better deal from the removal of import licensing and the lowering of tariff barriers and increased competition.

"Perhaps traders would get a better deal if there was increased competition among shipping companies," he said.

A spokeswoman for Commerce Minister Paul Swain said the issue was not on the urgent list for review.

ends


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