There are major importers bringing “vast quantities” of goods to the island who have “slashed” their freight bills following the introduction of a flat-rate card as part of the government’s 20-year agreement with DFDS, the Economic Development Minister has claimed.
Deputy Kirsten Morel – who earlier this month was forced to fend off calls for an inquiry from major retailer Morrisons which claimed to have been left with a budget gap of up to £400,000 – told States Members today that importers “now see that they can operate supply chain differently and in a competitive manner”.
During this morning’s sitting, the Minister faced several questions over DFDS’s flat-rate freight charge, which marked a significant change from the volume-based discounts Condor had offered and has drawn criticism from some retailers.
But Deputy Morel said that a flat-rate card “provides a safe and investable ferry service”.
Pictured: Deputy Kirsten Morel said that “the flat-rate card puts competition into the correct part of the supply chain”.
He continued: “This is my priority as Minister for Sustainable Economic Development, because the ferry service is the single most important part of the supply chain.
“The flat-rate card puts competition into the correct part of the supply chain.”
Deputy Morel explained: “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 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.”
Pictured: DFDS freight and passenger ship Stena Vinga.
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.”
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