This complaint from freight forwarders is starting to resonate. It appears the major container carriers are gradually refusing to sell bulk space on container ships to brokers and forwarders, instead making them buy on the spot market.
One of the issues is to determine whether the liner companies are favoring large brokers and forwarders with discounted contracts, to the disadvantage of smaller brokers. Are there sweetheart deals? I am betting that for sure there will be space available from large brokers to smaller brokers. Price discipline is notoriously hard to enforce.
Is it anti-competitive to offer spot prices? No, I think not. Is it anti-competitive to offer different prices to different groups? Quite possibly. It’s worth a review by government agencies and regulators.
In competitive economics, fairness is not a principle; however, in political life it could be seen as unfair to drive out of business a group of substantial size who provide customized services of a very precise nature in a niche, to some shippers. Those skills may have value to society as a whole that are not captured in prices. That’s where regulation comes in.
Liner shipping alliances were created years ago when there wasn’t enough containerized cargo for many competing ocean container carriers (sometimes called liners). They have evolved through time, a bit, but still allow several ocean carriers to band together to serve a particular route.
For instance, from Shanghai to LA and return, an alliance might provide weekly service. The companies then rotate in providing that ship for the service. If you book with one of thecompanies, you don’t know whose ship will be carrying the cargo, but it will be one of the members of the alliance. If everything goes smoothly and there are no delays, it should notmatter to the shipper whose ship they are on.
But when disruptions occur, as now, and ships don’t sail on schedule either because they are postponed by the line, or because of congestion in either the loading port or the unloading port, it becomes a problem.
The article outlines some of the complaints. Alliances have to be authorized by the specific counbtry they dock in. There is actually a bill in the US Congress to suggest that the FMC (Federal Maritime Commission) be given stronger powers to investigate problems and push the alliances to provide fair service to all customers.
Why did the EU decide to extend shipping alliances’ rights? This article in the Loadstar points to a short piece on Linked in calling attention to a study by Olaf Merk (and others) critiquing alliances and what they have done to the ocean shipping and port industries.
The study points out alliances were useful in the distant past, but today they are serving to consolidate ocean shipping, reduce offers and most every service, and they also put great pressure on ports to engage in competition on facilities, a costly endeavor that results in over-allocation of capital for the use of few lines.
I’ve attached the Merk etal. article below. He’s an eminent port and maritime economist, and what he writes should be taken seriously.