FAS upheld at Court its decision on a case against container carriers

On 7 September 2016, Moscow Arbitration supported a decision of the antimonopoly body regarding international container lines.

The largest shipping companies - A.P.Moller-Maersk A/S (Denmark), CMA CGM SA (France), Hyundai Merchant Marine Co., LTD (Korea), Orient Overseas Container Line Limited (Hong Kong) and Evergreen Marine Corp. Ltd. (Taiwan) filed a lawsuit to invalidate and abolish FAS decision.

At the end of 2015, FAS found that the above companies violated Clause 1 Part 1 Article 11.1 of the Federal Law “On Protection of Competition” by exercising prohibited concerted actions that resulted in fixing mark-ups to the freight rate on the market of liner container shipping on the Far East / Southeast Asia – the Russian Federation (St Petersburg, Ust-Luga) route in 2012-2013.

FAS has established that in 2012-2013 information about the mark-ups to the freight rates (General Rate Increase, GRI) were published on the web-site of a particular carrier, and then other market participants fixed the same mark-ups. After every decrease of freight rates the carriers fixed GRI mark-ups in a relatively synchronized and unified manner to increase or maintain prices. The FAS Commissions revealed at least seven incidents in 2012 and at least 9 in 2013.

Such concerted actions are prohibited in the Russian Federation for competitors, whose consolidated share on the relevant markets exceeds 20% and the market share of each of them separately exceeds 8%.

“Such actions periodically caused price increases and had an adverse impact upon consumers. The position is confirmed by a significant number of respondents. Obtaining public information that all key market participants increased the base freight rate relatively simultaneously and in a unified manner, the buyer had a weaker position in the course of negotiations in comparison with the carrier. The most adverse effect from such a conduct is generated for medium and small consumers who were forced to agree with the set mark-up to the freight rate”, commented Deputy Head of FAS Anti-Cartel Department Mukhamed Khamukov.

The annual container turnover from Asian ports to Big Port St Petersburg is around 550,000 loaded containers. Repeated introduction of mark-ups within a year by US $250-950 per container, even when partial or temporary, have an adverse impact upon foreign trade in the Russian Federation and upon the costs of goods for Russian consumers.

Domestic participants of international economic activities fully depend on the quality and costs of services rendered by foreign companies because there is no single Russian company among 16 container operators in the market.

A similar case was considered by the European Commission; based on the outcome of the investigation in 2016 linear carriers and the European Commission reached an agreement – the carriers refused to publish information about GRI in line with the previous practices.

“The Court ruling confirms inevitability of antimonopoly investigation even for foreign companies when they violate the law. Russian Law “On Protection of Competition” covers relations associated with competition protection, particular, involving foreign legal entities and actions performed by them, if such actions influence the state of competition in the Russian Federation”, pointed out the Head of FAS Anti-Cartel Department, Andrey Tenishev.

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The freight import base in liner container shipping from Southeast Asia to Russia (St Petersburg) is a wide range of fast moving consumer goods: cloths and textile, household appliances and electronics as well as chemical products, equipment, spare parts and components, food products, glass and products from it, etc.

Apart from recurrent transport equipment, the freight export base includes paper and cardboard, timber and products from it, mineral fertilizers, metals and scrap metal, etc.