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ACCC Targets Price-Fixing In Container Shipping

The ACCC is investigating competition in the container shipping industry, following the hike in freight rates caused by major disruptions over the past few years.

According to Drewry’s World Container Index, while global freight rates were 42 per cent lower last week than at the 2021 peak, they remain 64 per cent higher than the five-year average.

Gina Cass-Gottlieb, ACCC Chair, addressed the Ports Australia conference today with her concerns.

“We’re looking into the accumulation of empty containers in Australians ports, and the fees associated with them. Particularly, reports of drastically higher container detention fee bills, and container detention being charged in circumstances where a container couldn’t be returned due to a capacity constraint at the relevant container park.”

In a wide-ranging speech, Cass-Gottlieb highlighted many areas that are currently under investigation, including the habit of governments privatising ports without putting adequate regulation in place.

Recently, Port Adelaide, Brisbane, Melbourne, and Botany have all been privatised, as well as two key bulk ports in Newcastle and Kembla.

“Australia’s container ports are regional monopolies and in the absence of appropriate regulation, they can extract monopoly rents from users with no alternative,” Cass-Gottlieb explained.

This is an international issue.

“Shipping lines have increased their bargaining power over the last decade or so through consolidation and organisation into three large global alliances,” Cass-Gottlieb said, explaining this was initially in response to excess shipping capacity during a period of reduced demand after the 2008 global financial crisis.

However, exemptions provided by Part X of the Competition and Consumer Act could lead to artificially elevated freight rates.

“Part X is a legal anachronism,” Cass-Gottlieb said.

“It allows shipping lines to make agreements on rates, vessel sharing and scheduling, which might otherwise breach our competition laws, provided the agreements are registered with the Registrar of Liner Shipping.

“No other industry benefits from such a broad legislated exemption from Australia’s competition laws.”

The law was introduced in the 1970s amidst concern that Australia’s geographical remoteness make it unfavourable to international shipping companies.

“Since then, multiple reviews of Australia’s competition laws have found that Part X is outdated and unnecessary, and have recommended it be repealed. The ACCC shares this view.

“Over the years, other countries that had similar exemptions to Australia’s Part X have removed or limited them on the basis that the potential harm from allowing cartel behaviour by shipping companies may outweigh the benefits of regularity and reliability of service.”

The ACCC has also teamed up with the other competition authorities of the ‘five eyes’ alliance — United States Department of Justice, Canadian Competition Bureau, New Zealand Commerce Commission, the United Kingdom’s Competition and Markets Authority — to focus on these matters on a global level.

The reason that we and our international counterparts have prioritised this is there’s potential for companies in global supply chains to use the current conditions as a cover to engage in collusive conduct.

We’re looking for evidence of illegal co-ordination between competitors, such as fixing prices or restricting output. The reason for such conduct could be attempting to maintain high prices when the prevailing market forces are bringing them down.

The ACCC is readying a report on the industry, with recommendations.

“We are ready to act if we see businesses attempting to take advantage of supply chain disruptions to fix prices or share markets, or misuse their market power,” Cass-Gottlieb warns.

“While the supply chain priority is new this financial year, the ACCC has a lot of experience in these markets.”

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