By Arthur Chen      Photo：John Guccione

Have shipping lines been walking across the red line ? Fears of up to seven years in prison if involved in anti-competitive cartel conduct.

Global inflation has remained high this year, especially the year-on-year consumer price index (CPI) in the United States in January was still high at 7.5%, which has directly caused the public opinion support of the Biden administration to hit a new lowest level since he took office. Public grievances rage. Coupled with the explosive high profit of shipping lines in 2021 and the unattainable sea freight, traders and manufacturers in various countries had meager profits under the high sea freight, which is in stark contrast. Under the circumstances of soaring commodity prices and an unprecedented supply chain crisis, the United States, South Korea and other countries have successively launched survey against high-priced ocean freight. Recently, five countries set up an international working group to jointly launch a massive investigation into the potential monopolistic behavior of high sea freight. It is the largest in scope and intensity in a series of investigations since last year and has already sent shivers down the spines of some shipping lines. The Antitrust Division of the U.S. Department of Justice, the UK Competition and Markets Authority (CMA), the Australian Competition and Consumer Commission (ACCC), the Canadian Competition Bureau, and the New Zealand Commerce Commission have jointly established an international task force to investigate the current maritime industry. Joint investigation into alleged anti-competitive conduct, collusion and use of COVID-19 as an opportunity for cartel conduct.

Rod Sims, chairman of the Australian Competition and Consumer Commission (ACCC), said: "COVID-19 has caused supply chain disruptions experienced globally, and the five countries have set up a joint working group to investigate whether shipping lines are trying to use these conditions as a cover to collude and fix prices. ". The ACCC said increased demand for container transport had caused disruptions and delays to most economic activity amid severe congestion in global supply chains. Freight rates on major global trade routes are now seven times higher than they were two years ago.

The IT industry is one of the sectors most affected by these maritime supply chain disruptions. With the rise of remote work and digitally transformed work, COVID-19 restrictions have driven demand for hardware. For example, processors, power managers, display monitors, microcontrollers, etc. have skyrocketed in demand in remote work and life modes. However, it is faced with the situation of no ships, no containes, and extremely high sea freight, which cannot be supplied to all parts of the world in time.

The UK's Competition and Markets Authority (CMA) said the issue was international and one that would best need international action to be tackled together. With the support and intelligence of partner agencies around the world, if we uncover evidence of anti-competitive behavior, we can step in and take enforcement action together. Cooperation between governments is a huge starting point. Because a single country cannot monitor the conduct of foreign shipping companies alone, nor can it examine the comprehensive conduct of the activities of its powerful alliances. The CMA also encourages businesses and individuals to share information about "collusion or collaborate" in the maritime supply chain through its "cartel hotline". Authorities in the five countries are concerned that some shipping companies may use the interference to conduct anti-competitive collusion and deceive other companies and ultimately consumers. While price increases may be legal, the CMA is concerned about collusive anti-competitive behavior that manipulates price increases or prevents prices from falling.

The Australian Competition and Consumer Commission (ACCC) has also said the global freight supply chain is a complex web involving many jurisdictions, so investigating anti-competitive behavior requires strong international partnerships. Relevant agencies in these countries will share intelligence, and shipping companies will be particularly concerned about the type of anti-competitive behavior. This includes cartels and any other activities that have a significant impact on competition. Such as exclusivity arrangements for companies with market power to identify any conduct that restricts or distorts competition. The investigation results, if the shipping company has "cartel" behavior, up to 7 years in prison. The New Zealand Business Council has also published zero tolerance for unscrupulous businesses using COVID-19 as an opportunity for cartel conduct, such as unnecessary collusion between competitors or anti-competitive behavior. The International Working Group will strengthen continued efforts to deter and punish cartels. The five-nation co-investigation group has agreed that anyone involved in the cartel could face up to seven years in prison. Make sure shipping lines, their directors and employees are fully aware of the tough legal situation they will encounter.

Most shipping companies have shown concerns about national authorities. Their specific response, in addition to quelling public anger, CMA CGM announced in September last year that it would stop spot freight increases until February 1, 2022. And last year decided to close the 50-year-old informal meeting of the International Council of Container Carrier Operators called the "Box Club". It was a closed-door meeting held by the CEOs of the world's top liner companies. To prevent the surveyed organizations from finding that they have agreed to monopolize shipping prices. However, these actions still cannot divert the attention of relevant international organizations and shippers. Is this a bit of the phenomenon of "walking too much at on the red line, you will eventually meet a big bang"? We will wait and see.

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