26-29 September 2010 Hong Kong MAR 12 2010 SERVING THE INDEPENDENT FREIGHT FORWARDING COMMUNITY No.007 Venue: AsiaWorld-Expo THE majority of the world’s multinational freight forwarding companies have been accused by the European Union of anticompetitive price-fixing activities – which is likely to result in massive fines. In 2007 DHL Global Forwarding discovered certain activities within its own organisation that it judged illegal and, after an internal investigation, went to the authorities and exposed the global collusion. The EU and US Department of Justice (DoJ) believes that the companies colluded on certain surcharges levies on shippers. DHL elected to become the whistleblower in return for immunity from fines and prosecution. Some 47 companies across Europe, the US and Asia, including Kuehne + Nagel, Panalpina, DB Schenker, DSV, Multinationals in the dock UPS, Expeditors, CEVA, Nippon Express and Yusen Air and Sea recently received ‘statements of objections’ (formal charges) from the EU and will have two months in which to respond before the EU makes its final verdict. This alleged conspiracy against shippers brings to the forefront the nefarious means by which the multinationals have sought to gain advantage, revenue and market share at the expense of the independent sector. By colluding on surcharges, the multinationals appear to have sought unfair gains and set the surcharge rates at a level to suit their own means. First thought to solely involve airfreight, it is now believed that the conspiracy also involved fixing of surcharges on ocean freight. The illegal activity is believed to include collusion on new export system surcharge, advance manifest system surcharge, currency adjustment factor and peak season surcharge. Shippers have reacted angrily to the price-fixing allegations. Like many European shipper’s bodies, the Dutch Shippers Council (EVO), is backing a Europe-wide civil claim for damages that could drag on for years and cost the multinationals millions more in penalties. More damaging still for the multinationals is the dissipation of trust between them and their customers. This could take years to rebuild and open a door of opportunity for independents to emphasise the partnership approach with shippers, something that seems to have gone badly wrong with the multinationals. Whether the likes of Panalpina and Schenker will fight the accusations or plea bargain in exchange for small penalties is, as yet, unclear. But the signs are, with Kuehne + Nagel admitting they are a long way down the plea bargain process with the US DoJ, that many are unlikely to fight the accusations in court. If found guilty, the operators risk being fined as much as 10 per cent of their global revenues. Others, such as UPS, are maintaining their innocence and have stated they “will defend themselves vigorously”. With many of the multinationals placing such a major influence on price to win new business, sometimes at the expense of quality and customer relations, any proven price-fixing activity will damage their ability to control the market going forward. With the multinationals distracted by the ongoing court action, being legally pursued by their own customers and having their creditability and trust with shippers damaged, independents have a unique opportunity to prove to shippers that customer service, partnership, o If found guilty the operators risk being fined as much as 10 per cent of their global revenues reliability and honesty are virtues that they should not ignore. Despite claims to the contrary, in airfreight at least, the multinationals have not gained market share over the independents in the last decade. In fact in 2009 CASS figures show that the top 10 multinationals market share actually declined slightly. Customer loyalty to the independents seems to have helped, partially, to relieve some of the worst effects of the recession. With the multinationals in turmoil, there is a golden opportunity for independent forwarders to capitalise on a recovering market in 2010.