Five Eyes Nations Investigate Supply Chain Collusion By EU Based Shipping Lines

By Nicholas Booth - Just Trade News Editor

Unscrupulous shipping businesses may have exploited Covid chaos and supply chain snags to rig the market and form price hiking cartels, say competition authorities from across the globe. Soaring consumer prices and unprecedented supply chain disruption may be the consequence of shipping lines “using Covid as an opportunity for cartel conduct”, according to competition authorities from the US, UK, Australia, Canada and New Zealand. The ‘Five Eyes’ nations have formed a working group to put firms on notice over suspected anti-competitive behaviour and collusion practices that cheat businesses and consumers.

Michael Grenfell, the UK Competition and Markets Authority (CMA) executive director of enforcement, said that while some price rises are legitimate, collusive anti-competitive practices could both contribute to these rises and block price falls.

“These are global issues best addressed together with support and intelligence from partner agencies across the world,” said Grenfell, “we can step in and take enforcement action if we find evidence of anti-competitive behaviour.” The CMA is encouraging you to share information on supply chain collusion via its cartels hotline.

European forwarder group Clecat has also called on the EU to urgently investigate what it calls the “distorted” liner market. Clecat asked EU commissioner Margrethe Vestager to establish, “the degree of cartelisation” in the EU container shipping services markets and freight forwarding services.

Clecat director general Nicolette van der Jagt blames the Consortia Block Exemption Regulation (CBER), which allows significant collaboration between lines, meaning that they can manage capacity in markets and control costs. However, the EU’s previous review of the CBER was so “superficial”, that it could never have made “an informed decision”, said van der Jagt. James Hookham, a director at the Global Shippers’ Forum, said the CBER had “poisoned the atmosphere between the lines and shippers”, with carrier clients now assuming that there is untoward activity. The shipping lines’ creative management of capacity is often lost on regulators, who don’t look too hard for collusion and are too generous with exemptions, said Hookham.

Paul Zalai, director of Australia’s Freight & Trade Alliance, claimed the shipping line market was operating without real competitive checks and balances. “Foreign-owned shipping lines are proudly reporting multi-billion-dollar profits, using their new-found wealth to make strategic vertical integration supply chain investments. Some are now refusing to enter contractual arrangements with third-party freight forwarders, leaving exporters and importers at their mercy as price-takers,” said Zalai.

The Global Shippers’ Forum said that the block exemption regulation in Europe effectively allows behaviour which would be criminal in other industries. Since all the top 10 container lines are headquartered in Asia and Europe their competition authorities may be less likely to intervene.

Hauliers Could Thunder Into Mounting Profitability Thanks to Zeus Intervention

A new freight management system promises to help hauliers by connecting them to more jobs, cutting wasted journeys and empty miles and slashing costs.

Zeus Labs was created by Jai Kanwar and Clemente Theotokis with the intention of cutting the waste in the UK’s £25 billion freight sector and the founders claim it can give hauliers 30 per cent more load coverage.

Now Zeus has picked up Alistair Lindsay, Tesco’s global head of logistics and appointed him as its new chief operating officer. Lindsay joins a team that includes experts from UK logistics giant Wincanton and digital freight shipper OnTruck.

In an exclusive interview for Just Trade, Lindsay explained how this new system has made the deliveries run on time for German brewery giant Anheuser-Busch and revitalised Proctor & Gamble’s distribution.

“We’re cutting the waste of all those transport miles where lorries are running empty,” said Lindsay. Despite its vast scale the UK logistics industry is relatively luddite, with a low uptake of automation, said Lindsay. The poverty of freight management so far means that Zeus has been able to give clients 30 per cent more load coverage. The good news for freight forwarders and exporters is that the elimination of ‘empty miles’ means the cost of this inefficiency will no longer be passed on to them.

The Zeus system automates proof of delivery confirmations and payments. This makes it far easier for owner drivers and owner operators to get consistent work and grow their business. These small fleets of under ten HGVs make up the majority of haulage firms in the UK. These SMEs are effectively the haemoglobin in the lifeblood of British industry and Lindsay’s mission is to get them 30 per cent more oxygen so they can stimulate every organ of Britain’s import export industry.

Shippers use Zeus to instantly book loads, reduce administration, get fixed and clear prices, and use the platform’s technology to benefit from advanced freight to haulier matching. The hauliers who have used Zeus as a dedicated platform have experienced more constant work and grown their fleets. Zeus has substantially cured “empty mile syndrome” - the depression that comes when a truck is returning from a delivery without the dignity of a load. Said Lindsay. Zeus lorries clocked 1.17 million miles across Britain in 2021.

“The challenge is that this industry has been slow to adopt technology,” said Lindsay. “The technology is so seamless that it’s an app that can be run on your phone. It’s great for lorry drivers. Hauliers are underpaid and we want to level the playing field.”

Deal For Trade and Co-operation Delivered Neither Trade or Co-operation says BCC

Nearly three quarters (71 per cent) of UK exporters say the trade and co-operation agreement (TCA) deal with Europe has not helped them sell more. Only 12 per cent found it helped growth, says The British Chambers of Commerce (BCC) which surveyed 1,000 businesses, mostly exporters with less than 250 staff.

“These firms feel most of the pain of the new burdens in the TCA,” said William Bain, head of trade policy at the BCC. The exporters lack the time, staff or money to deal with the extra paperwork and rising costs involved with EU trade. Nor can they afford to set up a new base in Europe or pay for intermediaries to represent them, said Bain.

Most (60 per cent) had trouble adapting to the TCA changes, but 17 per cent found the adjustment easy. A minority praised the TCA as actively advantageous, saying it encouraged them to look at other markets outside Europe, and that it had provided better stability to allow them to plan. But 320 companies commented on the disadvantages, complaining of rising costs, bureaucracy or lost EU customers.

The BCC argued for more open and pragmatic approaches to free movement, customs enforcement, paperwork and other business complications. It called on the UK to make side deals and supplementary agreements with the EU, similar to those with Norway.

“This is the latest BCC research to clearly show there are issues with the EU trade deal that need to be improved,” Mr Bain said. “Yet it could be so different. There are relatively simple steps UK and EU policymakers could take to ease the burden on businesses struggling with the trade deal. If both sides took a pragmatic approach, they could reach a new understanding on the rules and then build on that.”

Some businesses are circumventing Customs to get their goods moving. However, it has yielded opportunities for ferry lines and for ports, as blockages at Customs have incentivised unconventional trade patterns and port calls.

A Belgian Gateway To Europe Makes Exports 30 Percent Cheaper, says FIT

Some UK milk and dairy exports to Belgium significantly increased in 2021, according to research by the Flanders Investment & Trade (FIT) organisation. However, most food sector exports to Flanders plummeted after Brexit. In response, the Belgian government has funded FIT to create a more friendly and communicative environment for UK-EU trading, it says. The aim is to demystify and simplify the process, according to FIT’s staff at the Belgian embassy in London.

A new study has identified the scale and causes of problems faced by UK exporters. From January to September 2021, UK food and drink product exports to Flanders decreased overall by 17 per cent, resulting in a total year to date decline in food category exports of €82.75m, FIT says. Fish and seafood exports fell by 87 per cent, meat by 75 per cent and confectionary by 67 per cent. A fifth of beverage sales were dropped and vegetable sales halved.

However, the total value of dairy exports to Flanders actually rose 24 per cent on the previous year. Tea, coffee and spices soared by 41 per cent. Diverse food preparation products, like ice-cream, sauces and concentrates, rose by 48 per cent. Though these successes brought in €5.9m and €12.2m of extra revenue, they are scant consolation for huge export losses.

FIT says it has identified the causes and is seeking to solve the problem.

While many businesses welcomed the zero tariff and zero quota trading agreement, the impact of post-Brexit trading resulted in Herculean customs challenges. The worst problems identified were over product certification and health certificates: changes in transport, logistics and fulfilment and sales taxes that relate to each individual EU country and must be settled upfront. The EU has introduced “intricate and complex” new rules, says FIT, and these changes make the eligibility for preferential rates elusive.

The global pandemic and Brexit appear to have had significant impact on UK exports to Flanders in the food and drink sector, said Astrid Geeraerts, head of investment at Flanders Investment & Trade in London.

One of the best ways that UK export businesses adapt to new regulations is to establish an EU base in Flanders, from which they operate trading with EU countries, according to Geeraerts. “Businesses can avoid the bureaucracy of navigating each individual country’s version of post-Brexit rules by managing all EU exports directly from one base,” said Geeraerts, “Flanders makes an ideal base because of our proximity to the UK and excellent connections to the rest of Europe.” What about those who can’t afford this investment? FIT offers UK SMEs support with logistics, distribution centres and legislation. It claims its Anglophile staff and tightly connected business network can make it a 30 per cent cheaper gateway to Europe than France.

Exporters May Get Easier Life By Accepting Countries’ Rules

Brexit opportunist minister Jacob Rees-Mogg has backed a radical policy from the Institute of Economic Affairs (IEA) for the UK to unilaterally recognise the regulations of other territories. This could make imported goods easily accepted into the UK market.

The IEA policy should be welcomed by anyone who believes in free trade, Mogg said.

As Just Trade has reported, the UK will stop using the EU’s CE mark after 1 January 2023, and products must be assessed under new UKCA (UK Conformity Assessed) certifications. This is because the EU does not want to continue mutual recognition.

However, the IEA report suggests that Britain could confound this obfuscation plan by unilaterally keeping the EU’s CE standards anyway. It says this policy, “should be adopted for all international trade where the rules of the exporting country meet the UK’s standards.”

This could save a fifth of the costs of doing business since non-tariff barriers, such as complying with safety regulations and customs marks, can cost the equivalent of up to 20 per cent tariffs on some goods, says IEA.

IEA report author Victoria Hewson said dismantling non-tariff barriers was just as crucial as the need to address tariffs. We need to be bold, said Hewson: “The UK has an opportunity to lead the world with a radical trade policy of recognising regulations, without requiring reciprocity.” The hardest part of that long journey will be the first step, which will be the EU, but it could transform the UK’s trade policy. It could ensure that goods which emulate our own standards are traded freely into the UK without unnecessary regulatory barriers, Hewson said.

There will be strong objection to unilateral recognition, acknowledged Hewson. Some will claim it compromises the autonomy of UK regulators and sacrifices our leverage. However, the gains from unilateral recognition would outweigh these potential disadvantages, Hewson claims.

Recognising multiple trading rules is expensive and time consuming, said Koyas Miah of the Suffolk Chamber of Commerce (SCC). Miah called for the Brexit Minister to bring more clarity to the situation. One member of the Institute of Export and International Trade was not impressed. “Rees Mogg is a fool of the highest order,” said a spokesman for Think Ambient, “He lies. There has been a severe impact of Brexit and all exporters are feeling it.”

EU Complains to World Trade Organisation About Chinese Copyright Theft

The EU has filed a complaint about China to the World Trade Organisation (WTO) which accuses the global superpower of preventing EU companies from approaching foreign courts to protect and use their patents.

The letter, addressed to Mr. LI Chenggang, Ambassador for the Permanent Mission of the People’s Republic of China to the World Trade Organisation, is unlikely to have any impact, if past events offer any context. The rot began in August 2020, when the Supreme People’s Court of China issued anti-suit injunctions involving three Chinese standard essential patents owned by Conversant Technology. The court ruled that Chinese courts can grant an “anti-suit injunction” to prevent patent holders from going to foreign courts to enforce their patents. According to the EU’s request for consultations, Chinese courts have issued four more anti-suit injunctions against foreign patent holders since then.

Now China blocks EU technology manufacturers, who have invented types of 3G, 4G and 5G telecoms technologies, from enforcing their rights when their patents are infringed. The patent holders who approach foreign courts typically face huge fines in China, placing them under pressure to settle for licensing payments that are below market rates.

In the filing, the EU claimed that this Chinese policy is particularly harmful to innovation and growth in Europe because it neutralises any technological advantage that EU companies might gain by stopping them from exercising and enforcing their rights. Intellectual property recognition would provide the natural checks and balances needed to maintain a fair competitive market. The EU has raised this matter with China on multiple instances, but no solution has been reached. Since this policy violates the WTO’s TRIPS Agreement, the EU has requested consultations at the WTO. “We must protect the EU’s vibrant high-tech industry, an engine for innovation that ensures our leading role in developing future innovative technologies,” said the EU’s commissioner for trade Valdis Dombrovskis, “EU companies have a right to seek justice on fair terms when their technology is used illegally. That is why we are launching WTO consultations today.” If the EU’s request for consultation is not resolved to its satisfaction within 60 days, it can ask the WTO to convene a panel to decide on the issue. Just Trade will investigate Britain’s position on this.


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