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In July, the International Maritime Organization adopted a Revised Greenhouse Gas Reduction Strategy. Although heavily qualified and actively resisted by several governments, it sets the shipping industry on a course to attempt to achieve net-zero carbon emissions by ‘the middle of the century’.

A key cause of resistance to the Strategy were proposals to introduce a Carbon tax or levy on marine fuels to incentivise shipping lines to switch to less polluting alternatives, such as ammonia, hydrogen or methanol. Many governments feared that these increases in fuel costs would simply be passed on to their shippers and forwarders through higher fuel surcharges. Global Shippers Forum (GSF) shares their concerns and points to the surcharging spree that accompanied the mandatory use of low-sulphur fuel oil in 2020.

Carbon taxes are well established financial methods for incentivising changes in commercial behaviour, but they only work where there is sufficient competitive pressure between suppliers to make the option of passing on the cost a real risk to customer retention. Far safer is to invest in the use of cleaner and lower taxed fuels so as to avoid the cost penalty. Customers then have a real cost advantage to show for staying with, or moving to, the supplier with the lower emissions, and hence lower costs.

The near-universal fear of higher shipping charges arising from a carbon tax speaks to the collective mind-set of the shipping industry. 

However, the flaw in the logic is that if shipping lines are successful in passing on the costs of any carbon tax, where will the financial incentive for them to change their behaviour come from? If the net costs of operation are no different, then a shipping line could, and probably would, carry on burning conventional bunker fuels at its customers’ expense. The carbon tax then just becomes inflationary to and a further burden on already highly stressed national economies, for no real progress in decarbonizing shipping.

GSF has already warned its members that a maritime carbon tax could result in the ‘Mother of all Bunker Adjustment Factors (BAF)’ and has asked IMO and national competition regulators to think through the real-world consequences of this move in an industry where services are routinely provided by carriers co-operating in consortia protected by weakly defined exemptions from normal competition rules. 

 

The digitalisation of supply chains presents significant opportunities for the business landscape, and this article will explain how it can enhance efficiency, but also attract scrutiny under competition laws.

Competition law in the digital economy and implications for the industry

Supply chain digitalisation increases opportunities for collaboration and information-sharing between competitors, what enhances supply chain efficiency. Such a collaboration, however, should be done by avoiding anti-competitive behavior such as price-fixing, market allocation, or sharing competitively sensitive information. In that sense, IT and digital solutions which pool competitors’ information together are a clear risk area for anti-competitive conduct.

Whilst digitalisation can foster collaboration between competitors, it can also give rise to competition concerns. The ever-evolving digital economy has seen growing concerns about tech giants engaging in monopolistic behaviour and unfair practices, stifling innovation, and data privacy. Competition authorities are increasingly taking enforcement action against such conduct, including actions in South Africa, China, the EU, the UK and the US against Meta, Alphabet, Amazon and Apple. Governments have also been developing new regulations, including in the EU (with its leading Digital Markets Act), China, India, Japan, Australia, Germany, Russia, the UK, the US, Brazil and Canada, and enforcers in Nigeria, Kenya, Korea and Singapore have drafted soft law initiatives.

UNCTAD’s Review of Maritime Transport 2022 found that technological developments over recent decades have contributed to horizontal and vertical consolidation in shipping and maritime transport, including acquisitions of e-commerce and IT businesses. Therefore, in addition to traditional market concentration concerns, monopolistic behavior, stifling innovation and data exploitation arising from digitalisation can trigger competition enforcement and regulation.

International cooperation

Regulating digital markets poses unique challenges. Given these markets’ global nature, international cooperation is crucial to creating a fair, consistent and effective regulatory framework which promotes and protects competition, data privacy, consumer protection and innovation. A competition framework is essential to provide a more level playing field for smaller tech companies and micro, small and medium sized enterprises to compete in a digitalised supply chain.
 

Freight digitalisation has the potential to improve efficiency, transparency, and agility for companies of all sizes. Small and medium-sized enterprises can benefit from the adoption of digital technologies, which can improve their competitiveness by reducing costs, enhancing customer service, and offering new services. However, it is also a strategic challenge that requires investment in digital technologies and processes.

Digital freight forwarders are growing rapidly and putting some pressure on traditional freight forwarders, since they use digital technologies to improve the customer experience and bring greater transparency to the supply chain. According to a study performed by Allied Market Research, even though the current market share of digital freight forwarders is 8%, its market value is projected to grow at a Compound Annual Growth Rate (CAGR) of approximately 23 percent from 2021 to 2023, compared to an expected growth rate of 4.2 % for the traditional global freight forwarding market.

Supply chain digitalisation refers to the use of digital technologies to improve the efficiency, flexibility, and growth of supply chain operations. It involves the integration of digital tools and processes to improve visibility, collaboration, and decision-making across the supply chain. However, especially when it comes to applying AI applications, it is crucial to have access to intelligent standardised data. Therefore, for a fair competitive environment, it is necessary to ensure equal opportunities in data access. Within the European Union (EU), the provisions of the General Data Protection Regulation (GDPR), the EU rules on data protection and privacy, also need to be considered.

The EU Data Act is an important instrument to make more data available for use in line with EU rules and values. It aims to ensure a fair distribution of the value of data between actors in the digital economy and to promote data sharing across sectors. It can also help to remove barriers to the development of a sustainable data economy in Europe and support the growth of the digital supply chain by making more data available to businesses, citizens, and public administrations.