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NZ Productivity Commission recommends clampdown on price fixing by shippers

Tuesday 24th April 2012

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International shipping companies servicing New Zealand should have to seek regulatory clearance to engage in price fixing and other anti-competitive arrangements, the Productivity Commission says.

Shipping companies are exempt from New Zealand competition law, leaving them free to fix prices in a way land-based firms would be prosecuted for attempting. The Productivity Commission’s international freight transport services inquiry concludes such historic arrangements are increasingly under challenge since the European Union repealed such exemptions in 2008.

The commission “recommends that New Zealand require shipping companies wishing to collaborate to fix prices or limit capacity to demonstrate to the Commerce Commission that there will be a public benefit which will outweigh any anti-competitive effects,” it said in the report released today.

International freight costs for New Zealand amounted to $5 billion in 2010, or 2.7 percent of gross domestic product. More than 80 percent of New Zealand’s trade with the rest of the world is by sea.

The commission’s inquiries showed that the cost of sending a 20-foot container from Auckland to export ports such as Singapore, Long Beach and Shanghai was “considerably more expensive” than sending one from Sydney.

This was likely to reflect the lower freight volumes moving out of New Zealand, which meant the fixed costs for ships had to be spread across fewer containers, the report said.

The commission’s report found that the nation’s port and border charges compared favourably with other OECD nations including Australian but the performance of port companies varied across the country and showed room for improvement in workplace productivity and governance.

The commission singled out Port of Tauranga as having an approach that “works well for its owners and customers, where majority owner Bay of Plenty Regional Council treats the port as a financial asset to be managed on commercial terms and with contestable containerised freight handling.

Other ports “are leaving money on the table” via a lower level of workplace productivity.

It recommends a more commercial focus for council-controlled ports and the exclusion of elected officials and council staff from board membership.

It cited submissions from the NZ Shippers’ Council that Ports of Auckland has a diminished appetite to demand significant efficiency and productivity gains since the city took 100 percent ownership of the port and it was delisted from the NZX.

For unions, it recommends reforms to the Incorporated Societies Act “to ensure modern governance structures and practices.”

Finance Minister Bill English said the government “will look at the Productivity Commission's recommendations and carefully consider its response over the coming months."

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