DFDS’s flat-rate freight charge helps provide “a safe and investable ferry service” to the Island by encouraging competition elsewhere in the supply chain – enabling the operator to invest in new ferries – according to the Economic Development Minister.
Deputy Kirsten Morel made the comments during yesterday’s sitting of the States Assembly, where he faced several questions on the change – introduced as part of the government’s 20-year contract with the Danish shipping firm.
It marked a departure from the volume-based discounts Condor had offered and has drawn criticism from some retailers.
Deputy Morel told States Members that the inclusion of a flat-rate card within DFDS’s tender bid for the Island’s ferry contract had been “welcomed by the Council of Ministers and approved as part of the selection of DFDS as the preferred bidder”.
He said that a flat-rate card “provides a safe and investable ferry service”, arguing that cost reduction pressures “pushed by the freight forwarders” had deterred the Island’s previous operator from investing in new ferries.
“The flat-rate card puts competition into the correct part of the supply chain.”
“Instead of the ferry service – the most important part of that supply chain – being beaten down on cost and price, competition will henceforth take place in the freight-forwarding part of the supply chain.”
He also stated that the freight-forwarding element accounted for 60% of the cost of delivering goods to Jersey.
“It is appropriate that competition takes place in that majority part of the supply chain, rather than the minority part, the single point of failure that is the ferry service.”
Deputy Karen Wilson asked whether the Treasury Department or Jersey Competition Regulatory Authority were consulted on “potential market effects of the policy” and how any “measurable improvements” in market competition would be monitored.
“I don’t believe Treasury were asked,” Deputy Morel answered, though he said the JCRA were asked about competition impacts “and whether it would be an appropriate mechanism from the competition perspective”.
“It is quite clear to me that the reaction that we are seeing at the moment suggests that the flat-rate card is indeed having the appropriate effect,” he continued.
“I know that there are importers to this island who have slashed the rate, their bills, for freight to this island.
“And by importers, I mean major importers who bring in vast quantities of goods to this island, because they now see that they can operate supply chain differently and in a competitive manner, so they are not beholden to the dominant supplier keeping them over a barrel.”
