Ocean carrier alliances control 95% of shipping between Asia and the US and have hiked rates more than 1,000%.
The White House wants to shake their control.
The vast majority of international shipping is controlled by just three cooperative alliances.
The White House says the consolidation has led to increased freight rates that spur inflation.
A new federal initiative will use anti-trust laws to promote competition in the shipping industry.
Expensive shipping costs are the target of a new initiative that the White House announced on Monday, which directs the Justice Department to use anti-trust laws to push the industry's largest companies to be more competitive with each other.
Roughly 80% of all global shipping capacity — and 95% of East-West trade — is controlled by a trio of alliances that allow freight carrier firms to coordinate rates and schedules.
This consolidation largely flew under the mainstream radar until the pandemic completely disrupted the global supply chain. Ocean carriers responded to the increased demand and reduced supply by hiking the rates for shipping cargo between Asia and the US by over 1,000%.
When freight costs go up, the prices of consumer goods go up too, and White House experts estimate that shipping will add a full percentage point to inflation in the coming year.
And it's not only consumers who are stuck paying more — exporters have complained that the major firms aren't carrying US products to foreign markets.
Some carriers apparently found it more profitable to send empty containers back to Asia to reload, instead of carrying US agricultural goods to other ports.
These ballooning prices have been good for shipping companies' profit margins, soaring to 56% in the third quarter of 2021, compared with 3.7% in 2019.
For President Biden, such fat profits in such a historically low-margin business are evidence of anticompetitive practices. He plans to address the issue during the State of the Union address Tuesday evening.
Under the new initiative, a regulatory agency known as the Federal Maritime Commission will coordinate with the Justice Department to identify and prosecute violations under the Shipping Act and the main US anti-trust laws, the Sherman Act and the Clayton Act.
"Competition in the maritime industry is integral to lowering prices, improving quality of service, and strengthening supply chain resilience," Attorney General Merrick Garland said in a statement. "Lawbreakers should know that the Justice Department will provide the Federal Maritime Commission all necessary litigation support as it pursues its mission of promoting competition in ocean shipping."
This heightened scrutiny of the shipping industry follows weeks of political messaging that blames corporate greed for making inflation worse. Other sectors that have come under the microscope include beef producers and oil companies.
No comments:
Post a Comment