The Demise of Regulation in Ocean Shipping: A Study in the Evolution of Competition Policy and the Predictive Power of Microeconomics

Over its 140 year history, ocean liner shipping has almost always enjoyed an antitrust exemption permitting price-fixing cartels of ocean carriers. The exemption was premised on the belief that problems of cost and capacity inherent in the trade can be resolved only by horizontal collusion. Now that that exemption has been whittled away by deregulatory efforts, the pre- and post-deregulation evidence presents one of the world\u27s rare opportunities for natural experiment on the behavior and effectiveness of collusive cartel pricing. Moreover, because normal and effective competition never really existed prior to 1998, the normative foundation of the antitrust exemption was based almost entirely on theoretically modeled economic arguments. Observing the industry\u27s behavior under deregulation is therefore a before-and-after opportunity to test the predictive accuracy of at least one body of economic argument. Finally, the evolution of shipping policy is also part of a larger historiography--the shipping exemption reflects the larger story of government efforts to cope with the problems of industrial organization