testata inforMARE

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13. Traffic Flows and Contestable Markets

Significant elements in the study of the arrangement and evolution of competition in the liner shipping considered may be found in the theory of the "contestability" of markets.

Barriers to entry may exist in national cabotage markets when the type of transport in question is subject to preferential treatment in favour of the fleet entitled to fly that nation's flag. Obstacles to entry to a sector consisting of intermodal feeder services for containers may also be deliberately created by one of the outside components (groups and alliances operating on the major oceanic routes); however, it is difficult to discern any advantage that an outside component could derive from such action, given that the potential newcomer would constitute an additional competitor in a market where it is in the collective interest to keep prices down.

Leaving aside this possibility, the markets consisting of traditional liner shipping, international regional connections with limited traffic ("thin routes") or local (short sea) traffic may be broadly termed "contestable". This emerges in recent analysis and may be explained with reference to reasons such as the following:

  1. lack of substantial and effective obstacles to market access for a newcomer (an outsider or a new participant in an open Conference of the North-American type) when there is no unilateral or bilateral flag discrimination. This has been the case even more since the traffic quotas (including those foreseen by the 40/40/20 rule of the UNCTAD Code for Shipping Conferences, approved in Geneva in 1974 and in force since 1983) have revealed themselves to be more sources of contention than of acquisition of traffic, and after the industrialized nations have adopted concrete persuasive measures in relation to the developing nations based on other types of advantage and concession granted to the latter;
  2. lack of "sunk funds" due to the type of fleet and organization, as well as to the possible adaptability of material and organization in other not markedly different traffic sectors;
  3. national or EU or UNCTAD Code regulations providing for fair play with regard to outsiders and newcomers in general. The consequence is a limitation of the possibility of a reaction on the part of those already present in the market (the idea of the "inert monopolist");
  4. brief (hit and run) market raids, in specific conjunctures or situations, can always be carried out by large groups and alliances operating on major oceanic routes, given the dual factors, firstly, that the use of means necessary compared to the size of the capital and the structure of the alliances is limited and, secondly, that the means thus used can be employed elsewhere without any problem, thanks to the global operational horizon of the group or alliance. (Consider, for example, the possible intervention by large alliances on "thin routes" in reasonably close proximity to the major routes on which such alliances operate.)


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