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COSCO & MSC Deny Allegations of Profiteering, Say Claims Are Bogus

COSCO Shipping Lines Co., Ltd., and MSC Mediterranean Shipping Company S.A. denied allegations that they colluded with other carriers to drive up freight rates.

Last month, MCS Industries, Inc., a furniture and home furnishing company based in Pennsylvania, filed a complaint with the Federal Maritime Commission (FMC) alleging that since the beginning of the COVID-19 pandemic, global ocean carriers have unjustly and unreasonably exploited customers, vastly increasing their profitability at the expense of shippers and the U.S. public generally, which bears increased freight cost in the form of inflation.

MCS said COSCO and MSC flouted their contractual service commitments, providing MCS with only fractions of the agreed allotments of space on their respective ocean vessels, and instead forcing MCS to make alternate transportation arrangements at substantially—often outrageously—higher spot market prices.

"As a result of the collective conduct and profiteering by COSCO and MSC and their fellow global ocean carriers, ocean carriage costs on the spot market have risen to crisis levels, threatening shippers’ businesses and generating price inflation to support massive windfalls for the carriers at the expense of the public. This conduct is unjust, unreasonable, and unlawful," the furniture company said.

MCS Industries wants the FMC to investigate COSCO and MSC and order them to cease and desist from further violations as well as pay MCS reparations for their unlawful conduct.

In its Answer, COSCO said it has done its level best to provide as much cargo-carrying capacity as it possesses to meet the extraordinary demand created by the U.S. import market. COSCO insists it id not deprive shippers of capacity or create any artificial scarcity. Moreover, COSCO said it did not refuse to negotiate with MCS. The allegations are false, COSCO pointed out that MCS also did not provide any evidence to support its allegations.

MSC, for its part, expressly denied that it has exploited customers. Rather, MSC said, it has dealt reasonably with unprecedented dislocations in international ocean shipping caused by substantial increases in demand at the same time that unprecedented port congestion has effectively limited available vessel capacity and created substantial operational difficulties for carriers, and has endeavored to comply at all times, and believes it has complied, with its contractual obligations to its customers, including MCS.

MSC objected to MCS’s mischaracterization of ocean carrier alliances such as the “2M Alliance” as “collusive”. MSC noted that such alliances are authorized by the FMC so that carriers can engage in related cooperative operating activities in various trades that create efficiencies that benefit exporters, importers, and consumers.

Both COSCO and MSC asked the FMC to dismiss the MCS Complaint.

Documents related to the proceeding -- 21-05 - MCS Industries, Inc. v. COSCO Shipping Lines Co., Ltd. and MSC Mediterranean Shipping Company SA -- can be viewed here.

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