I do not believe there is a great deal of concern among shippers about next year's scheduled repeal of the European law allowing liner shipping conferences. The concern instead is among carriers, but not for the traditional reason that a loss of antitrust immunity will lead to a loss in pricing power.
Over the past two years, there has been plenty of fretting among shipper groups about what kind of cooperation ocean carriers will be allowed to engage in following the repeal of Regulation 4056/86. Behind this is the suspicion that allowing too much carrier cooperation could lead to collusion on rates that would hurt shippers. The hue and cry by shipper groups has generated reams of press.
However, it hasn't engaged shippers with anywhere near the same degree of urgency with which shippers are approaching, say, the ports' clean-air plan in Southern California, which has the potential to slash harbor trucking capacity. The reason shippers aren't engaged is simple: It has been years since carrier conferences have been able to meaningfully influence rates. It's difficult to see the repeal of antitrust immunity in Europe, likely to be followed by the U.S. and other nations, as anything but a net benefit for shippers.
The coming repeal of the European antitrust law is generating debate, however. It is exposing tensions not between carriers and shippers, but among the carriers themselves. Behind this debate is perhaps a major structural imbalance of the global liner industry today, specifically the fact that Asian nations generate the lion's share of container cargo while the largest container lines remain European.
The debate is over information. In the coming post-antitrust era, whether in Europe or elsewhere, carrier cooperation will be based largely on information sharing. The carriers feel they need access to consistently reliable industry data on supply and demand - that is, provided by carriers themselves - in order to make smart decisions regarding new tonnage and deployments. Draft guidelines issued by the European Commission's Directorate General of Competition in September will allow the lines to gather and publish trade data and discuss the information within a trade association, provided the information is made public. That would be a change for some of the world's large European-based carriers, which are not public companies and have historically been very reclusive.
Asian carriers, by contrast, are more likely to be publicly traded and are therefore more comfortable about sharing operating data with the public. Asian lines are openly challenging their European counterparts to be more forthcoming, saying that market stability hinges on this happening.
C.C. Tung, chairman and chief executive of Orient Overseas (Inter-national) Ltd., told the recent World Shipping (China) Summit in Tianjin that 45 percent of global slot capacity is deployed by the four large Euro-pean carriers - Maersk, MSC, CMA CGM and Hapag-Lloyd - while the bulk of the remaining capacity is deployed by 13 lines based in Asia. That means the creation of a viable information system depends on the participation of the European lines.
"It is very important that the dominant players recognize their inherent interest in market stability and take the lead in the establishment of such a stable environment, by enhancing information transparency," Tung said. "Many of us are already voluntarily publishing operating and financial information on a quarterly basis. What is required would be more carrier participants with a set of more specific data, which I am certain would be welcomed by analysts and market observers alike."
He added, "It is crucial that the biggest players set these standards for the rest of the industry . . . Alter-natively, they can elect to destabilize the market."
Two points are worth mentioning in this context. One is that perhaps the moment is approaching for certain Asian lines to consolidate, and indeed in Tianjin there was some talk along these lines. There is recognition that without antitrust immunity, the only real way to achieve price stability is by carriers with large market shares taking a leadership role in pricing. The other is that stability is an urgent issue for the carriers, given the prospect that U.S. economic troubles could lead to a slowing of global growth, as some economists are predicting. Tung concluded that in this regard, "Our discussion about the industry in the post-antitrust exemption period seems particularly timely."