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Australian consumers are being ripped off by international shipping companies that are teaming up to keep freight costs high, the former competition watchdog Rod Sims has warned.

Two shipping companies – Israeli-based ZIM and the Swiss-based Mediterranean Shipping Company (MSC) – recently signed a vessel sharing agreement that limits the number of container ships coming to Australia.

Sims and the Maritime Union of Australia (MUA) believe the deal, under which ZIM will reduce its fleet in return for cargo sharing on MSC ships, will stifle competition and remove the need to offer cheaper prices to secure business.

The ACCC, while not commenting directly on this agreement, has called for more powers to crack down on collusion. The competition watchdog does not have the authority to regulate such arrangements despite them being controversial.
“When they get together … like this, it increases prices. These type of agreements really do a lot of damage to the Australian economy,” Sims said. “It is quite clear that Australians are paying more for a whole range of imported goods than they would if these sorts of things were not allowed.”

The MUA secretary, Paddy Crumlin, said the deal would result in 10 fewer vessels coming to Australia. Guardian Australia has been unable to verify that figure and ZIM and MSC have been contacted for comment. “This is a prime example of persistent market failure in Australia’s supply chains, with Australian workers once again bearing the brunt,” Crumlin said. “They’re slashing sailings, combining fleets and leaving a massive vacuum behind,” he said, claiming this would “exert pressure once again on Australia’s supply chains and working people”.

When the deal was announced the ZIM chief executive, Eli Glickman, said the deal was designed to “significantly enhance operational efficiencies” and confirmed the Australian market would be affected. “We expect that this strategic cooperation will benefit ZIM both operationally and financially, and it is another testament to our agility,” Glickman said.

The Australian Competition and Consumer Commission (ACCC) did not comment on the ZIM/MSC deal specifically but a spokesperson said it was “aware of the new shipping line cooperation agreements through our monitoring of the container stevedores at Australia’s major ports”. The ACCC has reiterated its call for more powers to crack down on collusion and “to encourage greater competition between shipping companies on Australian trade routes”. It wants a loophole limiting its role to be removed.
“Part X of the Competition and Consumer Act allows shipping lines to make agreements on rates, vessel sharing and scheduling, which might otherwise breach Australia’s competition laws, provided the agreements are registered with the registrar of liner shipping,” the ACCC spokesperson said. “Some level of coordination between shipping lines can deliver public benefits, but the exemptions given to the shipping industry through part X are broader than necessary.”

The assistant minister for competition, charities and treasury, Andrew Leigh, said the government’s competition taskforce was currently reviewing legislation.
“This will include looking at competition laws, policies and institutions and focusing on reforms that would increase productivity and reduce the cost of living,” Leigh said.

Earlier this year, the Productivity Commission also called for the loophole to be repealed. “If two or three shipping lines cooperate … when just one line can operate a route, shipping lines may avoid fighting for the single efficient market slot with immunity from Australia’s competition laws,” the Productivity Commission report said. “This will hurt consumers who would benefit from that competition but helps shipping lines as they avoid competition and lines leaving the market.”

Sims said he could not understand why successive Australian governments had not repealed the loophole to ensure more competition. “Virtually all other countries who had such things in their legislation 30 or 40 years ago have taken them out because the shipping market is so much more sophisticated,” Sims said. “This is an indication of how Australia really hasn’t been paying attention to competition over many decades.”