Calls to end shipping lines' price fixing

Pressure is mounting for shipping companies to be barred from price fixing and instead be subject to normal competition laws.

The Productivity Commission has called for the end to the automatic exemption for shipping companies from the Commerce Act, which outlaws price fixing and collusion on capacity unless approved by the Commerce Commission.

Many countries exempted shipping lines from competition laws in recognition that the nature of the industry required some collaboration to ensure a reliable service.

"But this view has been under increasing challenge, particularly since 2008 when the European Union repealed its block exemption for price-fixing agreements," the commission's report says. Since then European shipping prices had remained relatively stable and services constant.

"The commission recommends that New Zealand require shipping companies wishing to collaborate to fix prices or limit capacity to demonstrate to the Commerce Commission that there will be a public benefit which will outweigh the anti-competitive effects."

An automatic exemption would be retained for agreements that were for purely operational purposes. But such agreements should be registered with the Transport Ministry.

New Zealand's international freight sector is performing well, but there is scope for improvement that would lift living standards, the Productivity Commission says in its final report to the Government yesterday.

There was potential for a significant lift in workplace productivity in some ports, which would lead to higher real wages, better working conditions and more competitive and profitable businesses, the commission says.

Ports of Auckland is embroiled in a lengthy dispute with container wharf workers.

Commission chairman Murray Sherwin said the economy was sensitive to international freight costs, which were built into the prices paid for everyday imported goods and also affected the profitability of exporters.

"In total, we pay about $5 billion a year in freight costs. In 2010 that was about 2.7 per cent of our GDP," Sherwin said.

The commission found that shipping costs of a 20-foot container on routes from Auckland to Singapore, Long Beach in the United States and Shanghai were "considerably more expensive" than for the same routes from Sydney.

BusinessDay