EU raids Asian shipping firms’ Europe offices in antitrust probe

Monday, 23 May 2011 00:00 -     - {{hitsCtrl.values.hits}}

  • EU inspects Europe offices of NOL, OOIL, Evergreen Marine, Hanjin Shipping
  • Separate raids on Maersk, CMA CGM and Hapag-Lloyd
  • EU Commission says shipping firms may have violated antitrust rules
  • EU investigating possible abuse of market position
  • Collusion unlikely under current low rates environment-analysts

SINGAPORE/HONG KONG (Reuters) - European Union officials have raided the European offices of a number of Asian shipping firms as part of a probe into suspected price fixing in the sector, the firms said last week.

Singapore’s Neptune Orient Lines, Hong Kong-listed Orient Overseas (International) Ltd, Taiwan’s Evergreen Marine and South Korea’s Hanjin Shipping said that were all part of a European Commission investigation into the violation of antitrust rules.

European Union regulators also raided several liner shipping companies, including Danish group A.P. Moller-Maersk, France’s CMA CGM and Germany’s Hapag-Lloyd.

The European Commission (EC), which can fine companies up to 10 percent of their global revenues for breaching EU rules, did not identify the companies raided.

“We can confirm that the EC raided our office in the UK’s Levington,” OOIL spokesperson Stanley Shen said. “It’s a very general raid and not carrier-specific, it seems.”

Depressed freight rates have weighed on container lines in recent months, so the EU investigation is probably focused on early 2010 when rates, especially to and from Europe rose sharply as the sector recovered from a downturn, analysts said.

“I think what happened (early) last year was on the Europe lanes,” said Suvro Sarkar, an analyst at DBS Vickers Securities in Singapore. “We saw rates shoot up quite fast in a very short period of time, probably that is what prompted them (the European Commission) to investigate the liners.”

Global container shipping firms have been squeezed by a sharp fall in rates, driven by over-capacity and limited demand, since the start of the year and rising fuel charges. However the sector is expected to rebound later this year.

“Considering the current weak shipping rates, the price fixing practice, if any, should be very limited,” said Jimmy Lam, a shipping analyst at Daiwa Securities.

“The size of global idle fleets has been shrinking and is back to pre-financial crisis levels. Many shipping companies are suffering losses in European routes,” he added.

NOL, the world’s seventh largest container shipping firm, said in a statement late on Tuesday that the EC officials inspected its Uxbridge office in the United Kingdom.

“NOL understands that the intent of the inspection is to identify the existence of any evidence of infringement of anti-competition rules relating to the liner shipping industry.”

The Singapore firm, in which Singapore state investor Temasek Holdings holds a 66 percent stake, said it believes that it is in “compliance with the anti-competition regulations and is cooperating fully with the European Union.”

Evergreen Marine said European Commission inspectors visited its London office on Tuesday as part of an investigation into major container carriers.

“Evergreen will continue to fully cooperate with the EC agents in their efforts,” a company spokesperson said.

In Seoul, Hanjin Shipping said its Hamburg office in Germany had been inspected by EU officials and added that it would also fully cooperate with the investigation.

A.P. Moller-Maersk, which owns the world’s biggest container shipping company Maersk Line, said it was raided but its practices were in compliance with EU competition law.

The Commission’s probe covers the period from late 2008, when liner shipping conferences were banned, to the present, Maersk’s spokesman Michael Storgaard said.

Liner shipping was earlier organised in groups called “liner conferences”, which met to discuss market conditions, freight rates and other common concerns under a block exemption from European competition rules.

But the European Union decided in 2006 to ban the practice as against competition rules and the ban took effect in 2008.

The shipping sector is not alone in being investigated for suspected price fixing.

The EU last year ruled that several airlines including Singapore Airlines’ cargo unit were involved in price fixing.