Philippine Competition Commission eyes price-fixing in shipping sector

PCC eyes price-fixing in shipping sector
Tyrone Jasper C. Piad August 16, 2021 https://businessmirror.com.ph/2021/08/16/pcc-eyes-price-fixing-in-shippi...

PRELIMINARY investigation by the Philippine Competition Commission (PCC) showed that some shipping lines appear to be engaged in price fixing amid surging freight costs, but it has yet to obtain “definitive evidence” of the anti-competitive practice.

PCC Commissioner Johannes Benjamin R. Bernabe, in an interview with the BusinessMirror, said that certain shipping lines plying the Asia-Manila route are suspected of implementing same price metrics based on initial data.

“This kind of practice might be indicative of possible anti-competitive agreement or collusion,” he explained.

But the PCC is having a hard time securing “definitive evidence” of price fixing in the logistics industry amid the pandemic, Bernabe said, noting that conducting on-site fact-finding has been challenging.

Price collusion, or price-fixing, is an anti-competitive practice wherein competing businesses agree to control the prices, which usually result in higher rates for the consumers. It is punishable by administrative fine and imprisonment according to the Philippine Competition Act.

The PCC official explained that the simplest form of an absolute proof is a document, usually an exchange of mobile message or e-mails, showing communication among industry players about their agreement on the price offering.

“In more sophisticated business practices, particularly in international jurisdiction, [there will be no proof of such communication],” Bernabe said.

In this situation, a whistleblower via PCC’s leniency program can make a case, Bernabe said.

The said program allows a cartel member to come forward and detail the price-fixing behavior among competitors in exchange of immunity from any legal suit by the PCC in response.

“[For example, you are part of] cartel or collusive agreement, you feel that you are being shortchanged by the agreement and you are better off reporting on that kind of practice by your competitors, you can come forward and apply for leniency,” he explained.

Bernabe said that PCC may also file a case if industry players seem to be engaged in a price agreement. The factors to be considered include the amount of surcharges enforced, the implementation period of the price increase and the origin of the shipping lines, among others, he added.

For now, Bernabe said that PCC’s enforcement office is still investigating the matter.

“We have requested information from the shipping lines. They [PCC enforcement office] are going through all of those documents provided by the shipping lines that have cooperated,” Bernabe said.

The shipping lines that provided documents are mostly plying the Asia-Manila route, others are registered outside the country and some are part of a liner conference system, which is an agreement among shipping companies, Bernabe noted.

In April, the BusinessMirror reported that the PCC launched its probe on potential price-fixing in the logistics and shipping sector amid surging freight charges.

In conducting the investigation, the Philippine Exporters Confederation, Inc. (Philexport) previously said the PCC should go over each of the freight costs and see if they are “valid.”

“We suggest for the PCC to unbundle the freight cost and check each item if valid. I know there are fees such as cleaning fee, congestion fee, container deposit fee, imbalance fee, etc.,” Philexport Assistant Vice President Flordeliza C. Leong told the BusinessMirror earlier.

Standardized fees

Industry players have pushed for the use of International Commercial Terminology (Incoterms) for the shipping sector and while Bernabe said this might be a good idea, he noted this means turning a private agreement into public law.

Incoterms is a globally accepted standard for international trade.

“If the Philippines legislates[that] the Incoterms now have to be observed fully as a matter of law, then from a legal theory perspective, you are elevating essentially what is a private contract into public law, into state legislations,” he explained.

Last month, Philexport, Supply Chain Management Association of the Philippines, Export Development Council-Networking Committee on Transport and Logistics and the Philippine Chamber of Commerce and Industry said in a position paper that using Incoterms will allow businesses to have better cost management. As such, shipping lines can also be more competitive as it levels the playing field in terms of pricing, they added.

The industry groups blamed the high logistics fee on lack of regulatory oversight, given that no agency is tasked with monitoring local charges imposed by international shipping lines.

With this, the export industry stakeholders also backed the proposed Philippine Shippers Act of 2021 by the Department of Trade and Industry as this will boost transparency in the logistics sector.

The proposed measure aims to grant Maritime Industry Authority power to oversee the freight charges being imposed by the logistics service providers.