At the White House on Friday, President Biden signed an Executive Order focused on reducing monopolistic behavior and increasing competition across a wide variety of industries impacting American consumers and businesses.
For shippers, two industries which were included in the E.O. were liner shipping and railroads – both of which have seen a significant consolidation of competitors over the past decades. The concern with the few remaining companies is that both price and service are focused on the remaining companies interests rather than the shipping public at large.
The ability of the President to make an immediate impact is limited, and the scope of the orders tasks the Federal Maritime Commission and the Surface Transportation Board with investigating and taking action granted under their authority.
Importers will indirectly see relief as the Order is tasked with investigating unfair demurrage and detention charges and equipment availability for exporters. For rail shippers, the significant reduction in the number of Class I railroads has negatively impacted passenger traffic and costs.
The immediate reaction from the World Shipping Council who represents steamship lines was predictable in playing down the potential impact.
Quoted in The Loadstar, the WSC implies that the tremendous uptick in demand – 34% in the first quarter of this year – was causing marine terminals and rails and truckers to be unable to keep up.
Those selfsame carriers, however, have chosen to blank sailings and decline to take loaded exports from the United States, preferring instead to load empties and race back to fill them with freight that is more profitable by multiples.
Late on Monday, however, news broke that the Federal Maritime Commission and the Justice Department’s Antitrust Division signed a first ever interagency Memorandum of Understanding (MOU) to foster increased cooperation and communication in their respective oversight and enforcement responsibilities of the ocean liner shipping industry.
The FMC alone was likely unable to get carriers to sit up and take notice. With the aid of the Justice Department – the same Justice Department that sent many airline executives to prison for price fixing and collusion of surcharges – it is safe to say that carrier executives and leaders around the world are speaking to their general counsels to preserve records and prepare defense strategies.
From Sobel’s perspective, we both contract with these selfsame carriers for our customers’ seafreight while having to be the bearers of bad news as rates have continued ticking upwards. What we have seen and experienced firsthand is that the current climate benefits no one, neither shippers whose supply chains are weeks behind, nor carriers whose boom-and-bust cycle will draw attention and ire from the shipping community as they’re tracking for an estimated $100 billion in aggregate profitability in 2021.
