ORR approves Freightliner competition commitments

Commitments made by Freightliner Limited and Freightliner Group to strengthen competition in the intermodal freight sector were approved by the Office of Rail and Road (ORR) on December 18.

The ORR launched an investigation in November 2013 into the transport of deep sea containers by rail, following a complaint of anti-competitive behaviour. Its preliminary view was that arrangements between Freightliner and its customers “may be restricting competition with other rail freight operators for the shipping of goods between ports and key inland destinations”.

Freightliner (FL) has committed not to replace any restrictions on customers selling unused contractual capacity to third parties across all of its routes in the UK. It has also committed not to enter into any contracts that require customers to purchase exclusively from Freightliner or require customers to purchase any given proportion of their total demand from Freightliner.

Specific focus has been paid to routes from Felixstowe, Southampton and Tilbury respectively to rail terminals in the North West and North and West Yorkshire. FL will write to any customers affected by such agreements, and confirm that they are not under obligations to provide or take a number of wagons on those routes.

In order to address ORR competition concerns about “potentially exclusionary” Minimum Volume Commitments (MVCs), FL will not enter into any contracts of a duration of more than five years, and provide existing customers with contracts longer than that with the ability to terminate the contract on the fifth anniversary by providing at least six months’ notice in writing to the freight operator.

It will also remove all clauses in its contracts that provide for automatic rollover, and FL will not include such clauses in any new contracts. It is also removing clauses in contracts that prevent customers from informing alternative freight operating companies of the end dates of their contracts with FL.

For customers who enter into contracts with MVCs of more than three years, FL will provide them with an unconditional and unilateral right to reduce their contracted wagon commitment by 10% on the third anniversary of the contract and an additional 10% on the fourth.

However, where a contract was placed following an open advertised tender for the business, or where FL can prove the customer has approach to at least one competing freight operator in writing the commitments on contractual volume, release will not apply.

In order to prove it is upholding its commitments, FL will provide an annual compliance statement to the ORR every year, and submit a quarterly report to the ORR on the volumes of containers carried under contracts with a duration of more than one year.

The ORR concluded: “The commitments offered by Freightliner directly address ORR’s competition concerns by prohibiting all forms of exclusivity arrangements with its customers. This will give other rail freight operators increased opportunities to compete for the transport of deep sea containers.”