Three top global major shipping lines operating in Kenya will soon know whether they will be slapped with huge financial sanctions or given reprieve when a regional watchdog renders its verdict on a landmark pricing probe into the companies.
The Common Market for Eastern and Southern Africa (Comesa) Competition Commission said it is set to conclude it’s probe on two of the world’s largest container lines, Denmark’s Shipping group Maersk and French-based CMA CGM as well as Mauritius headquartered United Africa Feeder Line (UAFL), also a shipping company founded in 2000 as a regional feeder service in Africa.
The trio is accused of allegedly colluding to raise freight charges, a practice considered anti-competitive and illegal in a free market.
Kenyan traders, regulators and the country’s larger maritime sector will be watching keenly for the findings of the probe at a time shipping costs have skyrocketed around the world hitting consumers and sparking inflation.
The findings of the probe as also likely to put local Kenyan competition regulators in a spotlight if confirmed that there were breaches in the country’s maritime sector.
“It is in the public domain that the Comesa Competition Commission (CCC) is investigating shipping companies operating in the Comesa region for allegedly engaging in anti-competitive practices,” said CCC CEO Willard Mwemba in a regulatory update.
“The subject of this investigation is the alleged price announcements by Maersk, CMA-CGM and United Africa Feeder Line which signal price fixing conduct and is contrary to competition rules.”
Mr Mwemba said similar conduct has been punished in other jurisdictions.
Maersk, a Copenhagen-based company, is one of the world’s biggest container shippers with a market share of around 17 per cent and is often seen as a barometer of global trade.
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“Whether you are shipping standard, refrigerated or oversized cargo, we have the local expertise and global network needed to get it to its destination on time – wherever in the world that happens to be,” says Maersk on its website.
“With offices in Nairobi and Mombasa, we offer reliable weekly services that connect you to our vast ocean fleet. From here, the rest of the world is just a short hop away.”
French-based CMA CGM is one of the world’s largest container lines. It is based in Marseille and privately controlled by the founding Saade family.
“We operate in over 160 countries through 755 agencies, we design and implement intelligent solutions to take care of your cargo right across the supply chain,” says CMA CGM on its website.
The regional competition watchdog published on its website a notice of commencement of investigations on 23 March 2022.
“The CCC was concerned that price announcements could have increased freight prices and negatively impacted trade between Member States in the Comesa Region,” said Mwemba on Tuesday.
“The investigations are on-going and the parties to the investigations are cooperating well with the CCC.”
The agency says the three have been accused of price signalling, a move that has a negative impact on consumers.
The three shipping lines that are being investigated have operations in the Comesa member States including Kenya.
Mr Mwemba, earlier said they are investigating why these shipping lines raised their freight charges to the same level within a short time.
“We are investigating these shipping lines for price signaling, a move that if not checked could have a negative impact on consumers,” said Dr Mwemba.
“In particular, the Commission has observed that the shipping liners have issued price announcements which may be an infraction of Article 16 of the Regulations. The Commission has preliminary concerns that price announcements are a form of coordinated behaviour or concerted practice.”
The probe comes at a time Kenyans are grappling with high costs of food and essential commodities due to high freights costs.
The sea carries more than 80 percent of the world’s traded goods, most of which sail inside 40-foot-long steel containers stacked by the thousands atop some of the largest vessels ever built.
Freight rates surged in step with higher consumer demand during the Covid-19 pandemic, resulting in congested ports and delays
The cost of shipping a container on the world’s transoceanic trade routes increased seven-fold in the 18 months following March 2020, while the cost of shipping bulk commodities spiked even more, according to a recent International Monetary Fund (IMF) paper.
According to CCC, part three of the agency’s regulations, particularly Article 16, prohibits all agreements which may affect trade between member states and “have as their object or effect the prevention, restriction or distortion of competition in the common market”.