Shipping Conferences

• Brief Definition

Agreement between two or more shipping companies to provide scheduled freights or passengers service on particular routes under uniform rates and common terms.

• Broader Explanation
  

A shipping conference, is an association of several shipping companies that follow certain terms and then provide services. Shipping conferences member may agree on such matters like price fixing, total industry output, market shares, allocation of customers and the division of profits or combination of those. Even then, as most of conferences gain a huge monopoly power, shipping conferences is to increase individual member’s profits by reducing competitions.

• Functions

Shipping conferences are represent for every members benefits based on free trade, with following functions:

1. Shipping conference tend to monopoly certain particular routes, reduce rivals among the industry to increase every conference member’s profits.
2. According to every members exchanging suggestions, conferences make a policy provides to members.
3. Collaborate with other technological, manufacture, and business within same situation.

• Disadvantages of Shipping Conferences

Recently, most shipping conferences are exempted from United States markets based on the application of Antitrust Laws since 1914. Here are several negative impacts on markets of shipping conferences.

1. Monopoly Power:  Any shipping carrier as a part of shipping conferences tend to have monopoly power in the markets.  For instance, if a shipping carrier leave the conference, conference can easily lower the price and make it out of the business.
2. Lack of Choice： There is only few choices to choose, the market is less competitive, so there is lack of differences among each shipping carriers.
3. Low threat of entry: Even though shipping conference members can reduce the competition between the industry, some shipping conference will charge higher rates.

• Government Responses to Shipping Conferences
  The Sherman Antitrust Act of 1890 outlawed all contracts, combinations  that unreasonably restrain interstate and foreign trade. This includes cartel violations, such as price fixing and customer allocation. Sherman Act violations involving agreements between competitors are usually punishable as federal crimes.

• Reference:

What Are the Disadvantages of a Shipping Conference? | eHow.com http://www.ehow.com/info_8681021_disadvantages-shipping-conference.html#ixzz2CrDEtQ6G

http://www.oecd.org/regreform/liberalisationandcompetitioninterventioninregulatedsectors/2376087.pdf