Competition issues on pricing investigation in the liner shipping sector

So what’s really interesting about the recent commission investigation into the liner shipping sector is it raises this issue about the point at which companies can announce a public price intention, so an intention to increase prices without raising competition law concerns. Now competition law is there to prohibit anti-competitive agreements such as price fixing, such as rigging bids for contracts but it’s not really intended to stop normal commercial behaviour which might include letting your customers know that they have a price change approaching. And that borderline between what is permitted and what is illegal is quite interesting.

Now for serious price fixing we’ve just seen in the truck sector a 3 billion euro fine imposed by the European Commission and that related to a very long cartel and fairly clear cut behaviour. With liner shipping the case was more complex. When the public price announcements amount to signalling between the lines over a period of time which can create competition concerns. Now this was a long investigation, when it started with dawn raids five years ago, very onerous for businesses, officials running round the offices seizing lots of documents, seizing computers and making images of hard drives, then progressed through a number of rounds of questions which we had to assist them with. It then moved onto a phase where the Commission really set out its case and it became clear the case was purely about public price announcements, nothing to do with contact between the lines directly, no suggestion that they were speaking to each other about this. Now the legal test for the Commission is really difficult here, the Commission has to show that there was no other possible justification for these price announcements. For the lines it became quite easy to mount a solid defence because it was clear that there was some benefit to customers to having this information, it was also clear that if you looked at freight rates over time they were spiking up and down, as is consistent within the sector, but is not really consistent with a theory of harm that says the lines are trying to coordinate their pricing.

In the end it’s resolved for the time being with commitments so the Commission has backed down from a full infringement finding, no financial penalties on the lines and for three years the lines have signed up to certain requirements about price announcements, they will not announce prices more than a month ahead of implementation, they will be bound by price announcements so they won’t be allowed to make subsequent adjustments after announcing an intended increase and they will set out certain categories of detail which make the price announcements particularly useful for customers.

Now that’s interesting, it’s a good outcome for the lines, it will be very interesting to see what the Commission does at the end of the three year period, whether this is something they intend to monitor and enforce beyond that or whether after three years there will be more flexibility as to what’s allowed. And the read-across for other industries is really important because if you’re in another sector where you have a practice of announcing price increases to the market before they’re implemented, do you now have to apply the same framework that the shipping lines have settled on with the Commission? And if not does that push you into territory where you could be subject to investigation as well. It’ll be something to monitor very closely.