Alphaliner: Asia – Europe Carriers to Use New FAK Rates

Carriers in the Asia – Europe trade are expected to implement new ‘Freight All Kinds’ (FAK) rate structures, as part of a commitment to address the European Commission’s concerns over General Rate Increase (GRI) announcements, according to Alphaliner.

The latter had become a controversial feature of carriers’ pricing practices in the past on the grounds that GRIs might be in breach of European Union competition rules that ban concerted practices between shipping lines.

According to the European Commission (EC), GRI announcements do not provide sufficient information on new prices to shippers, while they do allow carriers to signal their pricing intentions to other shipping lines, Alphaliner writes.

In the eyes of the commission, GRIs thus give carriers a mechanism to coordinate their market behaviour. The EC launched inspection raids at several shipping lines in May 2011 and opened formal proceedings against 15 carriers in November 2013.

The investigation looked into claims that major global container shipping companies have been making regular public announcements on price increases signaling future price intentions to each other and harming competition during a five-year period from 2009 to 2013.

In February 2016, the 15 carriers involved in the proceedings promised to terminate GRI announcements, replacing them by FAK rates that will be binding for the carriers as maximum prices for the announced validity periods. However, carriers can still offer prices below these ceilings, with such price announcements not to be published more than 31 days before their implementation.

While pricing model has not yet been formally accepted by the EC, the Danish shipping firm Maersk is following the German firm Hapag-Lloyd in this direction.

According to Alphaliner, the two will become the first carriers to stop announcing GRIs for the Asia – Europe trade, and both have instead proposed new FAK rates of USD 1,450/TEU and USD 1,550/TEU, respectively, from 1 July.

The companies said to be included in the investigation are major shipping companies Maersk Line, Mediterranean Shipping Company (MSC), CMA CGM, Evergreen Marine, Hapag Lloyd, China Ocean Shipping (Group) Company (COSCO), China Shipping, Hamburg Sud, Hanjin, OOCL (Orient Overseas Container Line), Japan’s Mitsui OSK Lines (MOL), United Arab Shipping Company, Nippon Yusen Kaisha, Hyundai Merchant Marine and Zim.

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