A staff report released today by the Federal Trade Commission analyzes whether ocean shipping rates are affected by the presence and practices of ocean liner conferences. The report, "The Effectiveness of Collusion Under Antitrust Immunity: The Case of Liner Shipping Conferences", was written by Paul S. Clyde of the Justice Department's Antitrust Division and James D. Reitzes, formerly of the FTC's Bureau of Economics.
According to the study, several characteristics of ocean shipping suggest that rival carriers might be able to collude successfully and raise shipping rates:
- competing carriers are permitted by law to assemble into conferences;
- these conferences are provided antitrust immunity for certain actions taken jointly, including rate setting; and
- conference rates are filed with and enforced by the U.S. Federal Maritime Commission (FMC).
Using shipping rates filed by ocean liner conferences with the FMC between 1985 and 1988, the study analyzes whether the rate structure in ocean shipping markets is based on costs, the exercise of market power by conferences, or the exercise of market power by firms in a manner unrelated to the conference system.
The study "provides some support for the conclusion that some aspects of the conference system may contribute to higher shipping rates, particularly when the conference has a sizable market share," although it also finds that "conferences do not act as perfect cartels maximizing the joint profits of their members."
In addition, the study finds a positive, but economically small, relationship between overall market concentration and shipping rates.
Dr. Clyde is an economist with the Antitrust Division at the Department of Justice; Dr. Reitzes formerly worked as a staff economist with the FTC's Bureau of Economics. This report reflects the views of the authors and does not necessarily reflect the views of the Department of Justice, the Federal Trade Commission, or any individual Commissioner.
Copies of the BE study are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov