Unintended consequences of antitrust repeal

Unintended consequences of antitrust repeal

Spiller

   I very much respect the professional and logical arguments of the editorial ('Carrier immunity should set sail, November American Shipper, page 80). I agree it is possible, maybe probable, for antitrust immunity to go away in United States within a couple of years (but not next year).
   But I disagree that this would be a good thing, at least not for U.S. shippers and consignees, nor for the U.S.'s global competitiveness, a big part of which is tied to excellent logistics.
   Unintended consequences will result if H.R. 6167 as written is passed. If the draconian regulations of vessel sharing agreements were to come about, there would be no more vessel sharing in U.S. trades and a dramatic decrease in offering of service.
   VSAs under proposed regulations would hold economic danger for carriers far above any potential profit, so VSAs would be abandoned. Without VSAs only Maersk, Mediterranean Shipping Co. and CMA CGM would have fleets big enough to be global carriers on their own, and they would be able to achieve higher load factors and lower costs than smaller carriers. Service offerings would decrease greatly as would service quality. Eivind Kolding (whom you quote) would be smiling, more own (versus co-load) cargo to give greater economy of scale to customer service functions.
   Ability to discuss prices, and agree on a voluntary non-binding basis, usually softens price swings. Allowing that moderation gives the smaller carriers in a given trade a steadier revenue horizon when contemplating capital expenditures, most of which are very long-term. I think that without some ability to manage pricing collectively, the bigger players with their economies of scale would create slow, steady economic pressure on their smaller brethren until they call it quits, one way or another.
   Within eight to 10 years only one-third of today's carriers would exist, and the lessened competition would bring higher prices and reduced service.
   There are well-considered reasons antitrust immunity has been allowed to last so many years, in spite of many contrary and protracted initiatives to kill it. With open-minded analysis, one finally concludes that some limited price collaboration allows broad competition among many carriers. Without the small amount of moderation from collaboration, shipping companies would consolidate (one way or another) and eventually markets would be dominated by fewer, bigger carriers, meaning less competition. The few companies left standing would quite effectively (and legally) be able to signal each other and get prices up, now that there are fewer or no little carriers nipping at their heels, offering customers alternatives.
   Maersk Line is already, and quite effectively in my view, practicing this signaling technique, publicly announcing two North Atlantic 2011 general rate increases already in October. Could it be that the press releases will stimulate competitors to consider getting onboard?

Peter Spiller
president, Florida Shipowners Group Inc.,
Florida-Bahamas Shipowners & Operators Association,
Ft. Lauderdale, Fla.