A new report from the International Transport Forum (ITF), part of the OECD, claims that liner shipping does not have unique characteristics that justify exemptions from competition law, either for conferences or for alliances.
The study, named ‘The Impact of Alliances in Container Shipping’ said that generic antitrust rules should apply to all agreements between liner shipping companies and that countries where “conferences” are still allowed should reconsider their position.
Olaf Merk, Lucie Kirstein and Filip Salamitov, who wrote the report, want the European Commission to consider allowing the EU Consortia Block Exemption Regulation to expire in April 2020, as currently scheduled, rather
than extending it.
The top four carriers accounted for 60% of the global container shipping market in 2018 while the market share of the biggest carrier (19%) is larger than the market share of any global liner alliance before 2012.
The report noted: “A repeal of block exemptions is unlikely to result in the termination of current and future alliances, as these could still be authorised under competition law on a case by case basis. However, it would ensure greater scrutiny of individual alliances and thus more effectively deter any anticompetitive conduct in the sector.”
It added that if the block exemption is extended, “its scope should be limited, in particular by introducing a provision to consult maritime transport stakeholders and by excluding joint purchasing by alliances”.
According to the ITF, the three alliances today have allowed certain carriers to acquire mega-ships they could not have otherwise done, and the ordering of mega-ships has fuelled industry overcapacity.
The report claimed that the first generations of alliances allowed smaller carriers to achieve economies of scale, based on complementarity between them.
In contrast, it stated that the current three alliances are not serving the smaller carriers but each brings together two to three very large carriers that would be able to offer most of their services outside an alliance.
The authors claimed that alliances have made the maritime transport offer more uniform and limited the possibilities of carriers to differentiate themselves.
“Alliances have contributed to lower service frequencies, fewer direct port-to-port connections, declining schedule reliability and longer waiting times,” the study noted. “This has increased total transport times and delivery uncertainty for various shippers, leading to higher inventory and buffer costs.”
The OECD’s transport specialists asserted that alliances “have proved to be inherently unstable: considering that all major carriers are in alliances, changes in one alliance can have an impact on the whole sector”.
Among the recommendations made by the report is that project appraisal for port and hinterland infrastructure should be improved since much of the investment required to upgrade ports to handle mega-ships is publicly funded, either directly or indirectly.
It said: “New port and hinterland transport projects should be based on sound projections of cargo flows, particularly from shippers. Demands from carriers for new facilities should be supported by enforceable commitments from their side to actually use these, to minimise the risk that publicly financed ports will be underused.”
Additionally, the authors called for governments to define clearly which ports are expected to service mega-ships and which ports have different roles.
They added: “A reduction in the number of EU “core ports” in the Trans-European Network as part of the elaboration of a clearer and more detailed port strategy would also reduce overcapacity risks in respect of container ports for mega-ships.”