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What has been the effect of deregulation on the liner industry?
The liner industry has undergone a number of key reforms over the last few decades in an attempt to create a more competitive industry that offers customers tailored services. Regulation in this industry has been extensive in the past, with exceptions made towards carriers to minimise competition and allow harmonious operation of a large number of carriers within specified trade routes. The main reform examined here is the Ocean Shipping Reform Act of 1998 (introduced in 1999), which sought to deregulate the industry through eliminating regulations that protected carriers, and disadvantaged customers.
Traditionally the liner industry has been characterised by exceptional regulations and allowances. International liners typically existed in conferences – something that some equate to a legal cartel which were organised by trade routes, often between a series of ports in two different regions (David & Stewart, 2006). Conference members had sole jurisdiction to these routes and carriers were only permitted to operate within their given conferences (Radnor, 1999). This typically allowed a large number of carriers to operate within a trade route and charge a standard fee or tariff for a specified volume and weight that had been previously negotiated between members of the conference. The rates – or tariffs as they are referred to in the industry – had to be filed with the government or regulatory board along with other contract terms including service terms and inland points (Van Amum, 1999). Essentially, price negotiation between conference members was a form of collusion that permitted price-fixing to protect carriers’ market shares, and was allowed under an exception to the Antitrust or Competition Law (PR Newswire, 1999). In this respect, international shipping was treated as a commodity, perhaps due to high levels of fixed costs of up to 80 per cent of total costs, compared with...