BC ferry commissioner Martin Crilly’s recent ruling that BC Ferry Services Inc. has an unfair competitive advantage over private providers of a drop-trailer service is good news for competitor Seaspan Ferries Corp.
“We felt vindicated,” said Seaspan vice-president Richard Plecas. “We knew it was unfair.”
Seaspan has been lobbying for change since BC Ferries, which is owned by the provincial government, entered the drop-trailer market in 2009 (see “Government-owned BC Ferries squeezing private-sector cargo companies” – issue 1033; August 11-17, 2009).
The company operates two routes between Delta and Vancouver Island that compete with BC Ferries for drop-trailer business, which allows truckers to drop off their trailers on the mainland and have them ferried over to Vancouver Island to be picked up by another truck.
Traditional trailer-truck island-to-mainland transportation involves truck, driver and trailer travelling aboard ship.
Plecas said that since BC Ferries started offering the service in the early summer of 2009, Seaspan has had to reduce its scheduled sailings by 16%.
“I love my customers, but boy are they tough,” he said. “They move for a penny.”
Plecas noted that his clientele is in the less-than-truckload business, meaning they’ll fill their trailers with goods from a variety of retailers and generally can’t afford to drive their loads over live.
He said BC Ferries, with its quasi-government structure, has been able to undercut its competition by pricing the drop-trailer service below costs.
Crilly’s February 7 ruling supports that argument. The ruling states that BC Ferries has “an unfair competitive advantage” due to two factors: its income tax exemption, plus the regulatory framework it operates under, which allows it to meet costs, plus achieve a return on equity, through price caps.
The ruling further states that BC Ferries is pricing its drop-trailer service below cost and establishes a minimum allowed average tariff, to go into effect April 1.
The ferry commissioner has not revealed that tariff publicly, due to concerns about the commercial impact to BC Ferries of releasing that information to competitors.
Seaspan objects to that tariff not being disclosed.
“We don’t know if the playing field is being levelled or if it’s just being tilted,” Plecas said.
Plecas, however, emphasized that Seaspan doesn’t object to competition in its business, if it derives from “a level playing field.”
“We’re not against the competition, we never have been,” he said. “We actually think BC Ferries is well run. But in this matter we couldn’t stand by and let it stand.”
BC Ferries declined to comment on its drop-trailer business or Crilly’s ruling, but noted that its lawyers are reviewing the ruling.
Mark Stefanson, vice-president of public affairs for BC Ferries, noted that there is the possibility of appeal.
“We can’t appeal it through the commissioner because he’s made his determination, but it can be appealed on a point of law.”
BC Ferries triggered substantial concern earlier this month, particularly among islanders, when it announced that it will have to raise its fares by 100% on its northern routes, 50% on minor routes and 20% on major routes over the next four years, unless the provincial government ponies up an additional $25 million in subsidies.
Stefanson said that those additional costs are being driven by BC Ferries’ need to replace at least 15 vessels in its minor fleet over the next decade.
Crilly will be delivering his preliminary price caps March 31, after which the provincial government has three months to decide if it will up its subsidy or look at altering BC Ferries’ service. The commissioner will determine final price caps by the end of September.