Freight fight pits Oceanex against Marine Atlantic, as retailers fear higher shipping costs

Oceanex is going to Federal Court in an effort to cut the subsidy Marine Atlantic gets from Ottawa to transport commercial freight a dispute retailers fear could increase the cost of consumer goods brought into Newfoundland.

The privately-held Oceanex believes federal subsidies to Marine Atlantic give the Crown corporation an unfair advantage.

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In 2015, Marine Atlantic received $136 million from Ottawa for overall operating and capital costs.

In its Federal Court application, Oceanex says those federal subsidies to Marine Atlantic allow the Crown corporation to offer shippingrates that "are increasingly below [Marine Atlantic's] cost of providing commercial freight services."

It could be a lose-lose situation all across the board.- Jim Cormier

Oceanex wants an order forcing the federal transport minister to approve commercial freight rates that fully recover Marine Atlantic's costs.

Alternatively, the private shipping company is seeking a level of subsidized Marine Atlantic rates necessary to maintain freight service between North Sydney, N.S., and Port aux Basques, N.L.,"in accordance with the Terms of Union," but at a level not "injurious" to Oceanex.

"Obviously, we don't think it's fair, what's happened," Capt. Sid Hynes, executive chairman of Oceanex, told CBC NewsMonday.

"It's up to the government how they make it fair."

Transport Canada declined comment, while the matter is under judicial review.

Potential pocketbook issue

The pending court battle has the potential to hit the pocketbooks of Newfoundland and Labrador consumers.

The Retail Council of Canada is not taking a position on the dispute, sayingits members use services offered by both Oceanex and Marine Atlantic.

We would have to pass those costs directly to our customers, and those costs certainly are significant.- Darrell Mercer

But Jim Cormier, Atlantic director ofthe council, is expressing concern over the potential impact of the case.

"If there was a change in the subsidy and if costs went up dramatically for Marine Atlantic, there's a good chance we don't know for sure, but there's a good chance that those costs would be passed on through to customers, like retailers," Cormier told CBC News.

"Retailers are businesspeople. We are not the department of community service. Therefore, if costs increase significantly for us, there's a good chance that those have to be passed on to the consumer.So it could be a lose-lose situation all across the board."

Cormier said people in Newfoundland and Labrador pay five to 25 per cent more than those on the mainland for perishable items, due to transportation challenges.

He saidpotential cutbacks in service to a less-than-daily schedule, or increases in cost, will affect those prices even more.

"That could be problematic for the people of your province," Cormier noted.

'Those rates could go significantly higher'

Marine Atlantic officials are also expressing concern.

"If there is an impact in that operating subsidy through this lawsuit, those rates could go significantly higher," spokesman Darrell Mercer said.

Mercer said federal subsidies for the Crown corporation have historically been provided in recognition of the high cost of getting goods into Newfoundland.

"We don't make money; we provide a public service," Mercer said.

"From our perspective, without that subsidy, we would have to pass those costs directly to our customers, and those costs certainly are significant."

According to its website, Marine Atlantic transports more 100,000 commercial units each year, which accounts for more than 50 per cent of all goods being shipped to and from Newfoundland.

Those shipments include things like fruit, vegetables, meatand medical supplies.

Mercer said Marine Atlantic is "very concerned" about the pending Federal Court action.

'We're not driving the costs'

Meanwhile, Hynes disputes concerns about the potential for increased costs to consumers.

"In fact, the cheapest retailers in Newfoundland today are using Oceanex," Hynes said.

"So we're not driving the costs.That's not what it's about."