IL/U2 Topic 6 Conference system
A group of shipping lines which have associated to offer regular service on specific routes at publicly announced prices. Conferences generally offer specific rebates for regular or high-volume shipments. Shipment by conference lines is sometimes referred to as liner shipping and the freight rates are referred to as liner terms. Shipping lines which are not members of a conference for a particular route are known as outsiders, independent lines, or non-conference lines. Also called steamship conference.
Agreement between two or more shipping companies to provide scheduled freights or passengers service on particular routes under uniform rates and common terms.
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 of Shipping conference
Shipping conferences are represent for every members benefits based on free trade, with following functions:
- Shipping conference tend to monopoly certain particular routes, reduce rivals among the industry to increase every conference member’s profits.
- According to every members exchanging suggestions, conferences make a policy provides to members.
- 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.
(i) 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.
(ii) 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.
(iii) 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.