Anti competiton arrangements in liner shipping Essay

Submitted By mudhoneyman
Words: 566
Pages: 3

The nature of shipping industry implies that the companies performing activities within it should approach the market from a competitive viewpoint. Operating ships is a worthy task, but does not bring riches otherwise. What brings high profits is being in the right place the right moment, to rake in the money at the peak of a shipping cycle. Each twist of the cycle confronts investors with a new opportunity or threat. The aforementioned provide an idea of how challenging a shipping company’s management is.
The analysis of shipping industry has been always based on competition. Ups and down were largely affected by hit and run methods, large scale entries and a rather unstable freight rate mechanism. Before 2000 when the competition policy for liners started getting, the shippers and ship-owners by performing activities under a perfect competition model were adjusting to the freight rates and were eventually bringing supply and demand into a balance. However, the antitrust exemptions introduced new standards even though fixing of prices and capacity regulation in international shipping has created reactions among the maritime sector.
Through the regulatory reform the governments created a base for an efficient system that in return would provide constant economic and social prosperity. Increased productivity, lower prices and elimination of shortages were the first visible advantages of the reform. More specifically, In the case of liner shipping the anti-competitive practices delivered advantages beyond the ones discussed above. Carriers managed to avoid exaggerated rate fluctuations which are typical for bulker shipping. Moreover, antitrust reform helped in the avoidance of destructive competition and balanced the capacity so that transport can be continuous. Also investments became more frequent since the owners were working in a more stable environment.
Another factor that reinforces the anti-competition system results is that agreements between consortiums have been established for jointly organized services. Such agreements further implement the system with requirements concerning vessels, ports, and marketing. Under competition policy these consortia were variable and frequently with no power over other shipping owners. However, each company member of a strategic alliance created through the reform is still independent which adds up to the advantages. The arrangements never covered features of shipping such as joint managing, ownership, sharing profits and insurance. Each member retains its