Competition watchdog of India is looking into the local branches of international courier companies, including Germany’s DHL, United States-based United Parcel Service (UPS), and FedEx, over suspected collusion regarding discounts and tariff practices, as per documents reviewed by Reuters.
The logistics sector is currently facing increased regulatory scrutiny, with some investigations dating back to 2015. During that time, France imposed fines totaling $735 million on 20 companies, including FedEx and DHL, for engaging in covert collusion to raise prices.
Recently, the Competition Commission of India (CCI) has commenced a thorough examination of hundreds of thousands of emails as part of its investigation into the charges imposed by companies for airport services. This information is based on government documents and insights from three undisclosed sources.
The investigation was initiated in October 2022 following a complaint from the Federation of Indian Publishers. The complaint alleged that DHL, FedEx, UPS, and Dubai’s Aramex, in collaboration with certain domestic companies, were jointly determining charges and managing customer discounts.
If substantiated, these activities would be in contravention of Indian antitrust laws.
According to the documents, the publisher asserted that executives from the companies exchanged commercially sensitive information related to volumes, charges, and discounts for courier and storage services at airports, prior to making decisions on rates.
The Competition Commission of India (CCI) noted in its preliminary assessment, which prompted the broader inquiry, that the companies seem to be exchanging commercially sensitive information among themselves. This sharing of information is apparently done with the purpose of making joint or collective decisions to determine tariffs.
In a statement, FedEx unequivocally rejected the allegations in the complaint but stated its cooperation with the CCI, emphasizing its commitment to legal compliance. DHL similarly asserted full cooperation and a consistent adherence to legal requirements. UPS mentioned its inability to provide details on an ongoing and non-public investigation but assured cooperation with the regulatory authority.
If cartelization is established, the companies involved could face a penalty equivalent to three times the profit for each year in which the fees were collusively determined. Alternatively, the penalty could be 10% of annual revenue for each year of the violation, whichever amount is greater.
The surge in e-commerce is driving increased demand
Several companies are optimistic about the future of the courier, express, and parcel delivery services market, anticipating a 17% annual growth to reach $18.3 billion by 2029, driven by the booming e-commerce industry, according to research firm Mordor Intelligence.
In 2022, DHL announced a $547 million investment to enhance its warehousing and workforce in India, designating the country as a key market. Recently, a unit of FedEx allocated $100 million for the establishment of a technology and digital innovation center.
The majority of the companies under investigation provided emails to the regulatory body in response to notices sent after the identification of key executives implicated in the alleged misconduct, as indicated by the documents.
Investigators have requested an extension until March to thoroughly examine all the evidence before compiling an internal report.
According to documents, the watchdog’s review in 2022 revealed that courier companies determined charges for airport services during meetings, subsequently making them “mandatory” for all participants in the agreement.
The group filing the complaint also claimed that certain companies implemented a fuel surcharge ranging from 17% to 22%, attributing it to increasing fuel prices. However, they allegedly failed to reduce these surcharges when fuel prices subsequently decreased, particularly during the travel restrictions imposed due to the COVID-19 pandemic.
“Such conduct appears to emanate out of coordination or collusion,” the CCI said in one document.
According to Reuters.
By. Pham Thanh Bien
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