The Antitrust Ambiguity Concerning Intermodal Transport in Europe



The Antitrust Ambiguity Concerning Intermodal Transport in Europe

Authors

E Lopez, INRETS, FR

Description

Abstract

The purpose of this paper is to introduce a new reading about competition and intermodality in Europe. Using the New Institutional Economics Theory, particularly the Transaction Cost Theory , and the information collected from interviews, we are going to analyse the organisation forms present in the intermodal transport chain in order to explore how cooperation and competition are central issues for ocean carriers. Without cooperation, carriers cannot offer a door-to-door service. However, this cooperation does not mean less competition because their activities overlap and they 'fight' for the same market demand.

In fact, ocean carriers would like to achieve a price agreement when they offer a carrier-haulage service. That means that the ocean carrier has the responsibility, vis-à-vis the shipper, for the door-to-door service. In this case, the interior carriage of goods is accomplished for its account. Next to the carrier-haulage, there is the merchant-haulage service: the routing of containers is not carried out by a carrier but by a transport agent . In Europe, the merchant-haulage has the greatest market shares of door-to-door service, except for the United Kingdom where 70% of the market is in carrier-haulage hands .

The difference between merchants and carriers is the characteristics of the service that each can offer. Several specialists in the shipping sector affirm that merchant-haulage has not the same development conditions that carrier-haulage does because of financial funds, cooperation agreements and logistics structures of carriers. Possible imbalances between carrier-haulage and merchant-haulage remains a debate open nowadays. The competition authorities take into account the complaints of merchants and shippers, and analyze carriers' possible abuses as regards intermodality.

Agreements on prices are allowed in the maritime segment by the European competition regulation, but forbidden in the inland leg. Carriers have the right to relate in conference if the agreement presents the requirements determined by the competition regulation (article 81 and 82). These rules concerned dominant position abuses and agreement's control. Furthermore, the Council Regulation 4056/86 covers the conference case. This regulation said that sectors characterized by a strong uncertainty caused by the fast evolution of technology, by demand fluctuations, by the need of scale economies, could use price agreements . Certainly, collusions can disturb the market competition but some times, they can have positive effects for the economic effectiveness . The antitrust authorities estimate that shipping activity is particular and that a price agreement is necessary for the development of this sector.

Conferences prove to be one of the organization forms most adopted by carriers and one of the rare examples of collusion authorized by antitrust authorities. Why are price agreements allowed in the shipping sector while they are condemned elsewhere? It is the question made by the economist when he analyzes the competition regulation regarding intermodality. If intermodal transport is considered as a one-piece service (from origin to destination) and not a succession of two separated activities (maritime and inland transport), the regulation deserves a re-examination.

Why the European regulation does not allow ocean carriers to agree on prices when it is about door-to-door service? Is it because of the risk of reducing market competition? Then why does the American shipping regulation tolerate price agreement between ocean carriers? To understand the Commission's decisions, it is advisable to present briefly the theoretical bases of this legal resolution. European competition regulation is inspired by standard economic principles about perfect competition .

In general, the common principle to all antitrust regulation is the opposition between consumers and producers . For instance, the antitrust acts have as an aim «to ensure competitiveness while being based on the assumption according to which, thanks to competition, desires of consumers will be satisfied at lower price and goods will be produced at lower cost, with the use of the smallest quantity of possible resources [...]. In economic terms, competition maximizes the welfare of consumers and producers, on one hand by increasing the productive efficiency and, on the other hand, by supporting dynamic efficiency' . In this direction, the European regulation protects consumers and prohibits behaviours likely to restrict competition in order to guarantee economic efficiency.

Until now, some economic theories have been applied to determine how competition works in the shipping and intermodal activity (Contestable Markets , Core Competition ), but they do not take into account the interaction between some key elements in order to understand the dilemma between cooperation and competition: coordination, synchronisation, just in time, uncertainties, engagements, contracts, and others. New Institutional Economics Theory leads us to conclusions different from those of the European competition regulation in its regards of organization forms and competition in intermodal transport.

The analysis of the transaction chain will help us to grasp the articulation between different types of contracts as multilateral cooperation instead as a monopoly. The results will show that the governance structures chosen by carriers are far from being integrated forms. Therefore, carriers can neither abuse from their position nor harm intermodal transport competition. We will analyze some relations that characterise the door-to-door transport chain: the relation between carriers and shippers, transport agent and shippers, carriers and suppliers, and transport agent and suppliers, in order to explain why we can talk about cooperation and not concentration.

Our analysis starts by defining the institutional environment (European competition regulation) as rules of the game followed by the actors of the intermodal chain (ocean carriers, railroad, truckers, freight forwarders, and shippers). Using the Transaction Cost Theory approach, we will then study the organisation forms adopted by these actors to offer the intermodal transport service in the transatlantic trade. Finally, we will conclude that a regulation reform is needed with respect to competition and intermodal transport.

Publisher

Association for European Transport