If you’re waiting to buy just the right gift this holiday season, shop early or prepare for some disappointment. Store shelves and digital marketplaces will offer limited options this year amid unprecedented supply chain breakages and backlogs, including global shortages of semiconductor chips, dock traffic created by COVID-19 absences and limited labor supply, and factory shutdowns in China. For holiday shoppers, just-in-time delivery may be a little too late.
As we approach peak shipping season, when retailers stock up for the holidays, the chaotic situation is only getting worse, particularly at ports in the United States. The Southern California ports that process nearly 50% of America’s imports are hitting new records for congestion, with dozens of ships carrying some 500,000 shipping containers stuck offshore or racking up port fees.
But while manufacturers, distributors, and retailers are going to extreme lengths to serve their customers, one tiny but powerful group has seized on the crisis as a chance to cash in: global ocean carriers. The top 10 ocean carriers, none of them American, have seen profits jump to over $16 billion in the first three months of 2021 alone, and all but three increased their profits 50% to 200% from a year prior. One financial analyst estimated that the major ocean carriers’ profits for 2021 might reach $100 billion.
How did we get to a place where U.S. consumers and companies are paying exorbitant prices while foreign shipping magnates reap record profits? As the value of global shipping has grown, the number of carriers has shrunk. In 2000, the 10 largest ocean carriers controlled 12% of the market. Today, they control more than 80%. As President Joe Biden noted to the Federal Maritime Commission in a recent executive order promoting competition, the backlog leaves “domestic manufacturers who need to export goods at these large foreign companies’ mercy,” allowing them to charge “exorbitant fees for time … freight was waiting to be loaded or unloaded.”
Put simply, carriers have been using the port slowdowns to impose exploitative prices and surcharges on U.S. importers and exporters. Most commonly, this has included charging penalties for the “failure” to promptly unload containers, even when backups mean the recipient of the goods cannot even access the port. But the FMC has limited power to review pricing, burdening both importers and exporters, such as farmers sending food abroad and other manufacturers shipping overseas.
Congress is trying to help. The Ocean Shipping Reform Act sponsored by Reps. John Garamendi, a California Democrat, and Dusty Johnson, a South Dakota Republican, would rein in shipper misbehavior by making it more difficult for them to impose extortionate fees for circumstances outside their customers’ control.
The skyrocketing cost of shipping containers is only adding to the headaches for retailers and consumers. A container that pre-pandemic cost $2,500 to ship has surged to $25,000 or more. When prices across an entire industry suddenly increase even a few percentage points, government regulators and private antitrust litigators typically step in. But in the U.S., they can’t. Ocean carrier shipping rates have a complete antitrust exemption dating back to 1916. As a result, U.S. regulators are largely powerless to respond to the crisis.
Given the exponential increase in prices, Congress should pause the antitrust exemption until the shipping crisis is over. Sudden price jumps would be tantalizing fodder for any government regulator or plaintiff’s attorney. The pause would allow our farmers and manufacturers to export at lower costs and families to buy holiday presents at reasonable prices.
Temporary revisions to the antitrust exemption would almost certainly get bipartisan support even in a divided Congress. Indeed, late last year, Congress passed legislation limiting the scope of antitrust exemptions for the health insurance industry.
It’s abundantly clear that ocean carriers have taken advantage of the exemption and the COVID-19 pandemic by pushing exorbitant fees that are passed on to millions of people. They may have made sense a century ago, but any basis for exempting ocean carriers from antitrust regulations no longer holds water. Antitrust laws covering nearly every other industry exist precisely to prevent the kind of exorbitant price jumps we’re now seeing.
This is an absurd injustice benefiting foreign carriers and hurting the public. Both political parties should agree that hitting pause on the Shipping Act’s outdated antitrust exemption is the simple, obvious, and pro-consumer solution — and take immediate action.
Gary Shapiro is the president and CEO of the Consumer Technology Association, North America’s largest technology trade association, and a New York Times bestselling author. He is the author of the book Ninja Future: Secrets to Success in the New World of Innovation.
