The Organization and Regulation of International Shipping Cartels

301 p.Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 1997.The international liner shipping industry is organized into cartels and has been for over one hundred years. This thesis consists of two parts: the first analyzes the shipping conference phenomenon from the perspective of industrial organization, and the second evaluates the regulation of the industry utilizing the tools of political economy. In chapter one, I examine the internal organization of shipping conferences in the early years of their existence, prior to World War I. I find a considerable variety of experiences, and little power attributable to explanatory variables normally supposed to facilitate collusion. Shipping conferences were not perfect cartels in that they did not regulate capacity efficaciously. The second chapter critically discusses the theory of destructive competition, and the third examines the use of deferred rebates as a contractually designed barrier to entry. The essential conclusion from the three chapters of part one is that shipping conferences are able to exercise market power, although the fruits of that market power are to some extent eroded by excess service competition. In addition, a preponderance of the evidence does not support the "destructive competition" contention that if the conferences were prohibited on antitrust grounds that the industry would simply disappear. Given these conclusions, in part two I turn to examine the history of the regulation of shipping conferences in the United States. In chapter four, I view the development of regulation over the long term. The fifth and sixth chapters are detailed analyses of the two key pieces of regulatory legislation: the Shipping Acts of 1916 and 1984. The capture theory of regulation does not explain adequately the passage of either law. In the case of the Shipping Act of 1916, the initial intentions appear to be consistent with a public interest theory of politics, although the enforcement of the law was subverted due to the circumstances surrounding the aftermath of World War I. This crisis and response had long lasting effects, and the bureaucratic agency responsible for regulating the shipping industry came to be very much associated with it. The Shipping Act of 1984 conforms more closely to the capture model, although the "supply side" of regulation, particularly the Congressional committee system, were of fundamental importance.U of I OnlyRestricted to the U of I community idenfinitely during batch ingest of legacy ETD