testata inforMARE

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14. Major Routes, Contestable and Non-Contestable Markets, Landbridges

As has been argued above, the most important new elements in the evolution of new market forms in international shipping competition regard the large companies, groups and global alliances, on the one hand, and the major oceanic or circumnavigation routes of intermodal and especially containerized transport, on the other.

As far as concerns the major oceanic routes or "Round-the-World" services, the magnitude of the "sunk funds" is certainly considerable compared to the fleet, the shore structures, the networks of transport and internal terminals and the organization of the system. Here as well, as emerges from the recent surveys already cited, it seems reasonable at least for this reason to hypothesize, alongside a potentially very limited degree of competition within the markets, a substantial "non-contestability" (or at least low level of contestability) of such markets.

Nor should it be thought that the competition "between major routes" - for example the previously cited "pendulum routes" Singapore/Mediterranean/Northern Europe/ New York as opposed to Singapore (the East)/Los Angeles/New York, or global circumnavigation routes - constitutes a case of "contestability" of markets. Each such system of routes and/or service requires its own organization involving a suitable fleet, appropriate technology, knowledge, an organizational complex, agreements between different types of major carriers and/or shippers - i.e. a very substantial "sunk fund". The material, organization, network, technology and agreements generally cannot be transferred from one major route to another without heavy losses.

The situation which is emerging is simply that of competition between strong economic systems with a territorial basis - just as these may emerge in the shipping sector - and between large shipping centres in a global market. It is an emblematic example of global economic competition. This specific competition places important limits on policies of pricing, quality, fleet and organization implemented on the individual major routes, even though the latter have oligopolistic market forms in relation to the existence of other large entities operating on the world market. All things considered, this is simply a derivation from the theory of the limit price. And it is not accompanied by the distinguishing features of the contestability of markets.

Nevertheless, within this global framework it is possible to identify a number of cases of the contestability of markets. For example, both the North-American landbridge and those proposed in Europe are not necessarily based on material which cannot be otherwise employed, even where such material is specially built. Railway networks on a continental scale such as that in North America and, today, also that in Europe, can offer various alternatives for diversified use of the material employed. By way of example, in the previously mentioned case of the shuttle train for containers from Milan to Rotterdam, an extension of little more than 100 km can turn it automatically into a landbridge, which can just as easily revert to being a shuttle service on the original (or some other) route.

By the same token, the organization of networks of inland terminals, or operational complexes such as "Distriparks" or "Trade and Distribution Centres", could be utilized for different ends even though they were conceived and established for service on the "pendulum routes". The port infrastructures and plant can be used by different flows of traffic, even where they are initially designed for one specific purpose. And so on.

In none of these cases is it possible to speak of a "sunk fund" or non-reversible commitments. While, for its part, the competition between ports and between shipping centres is intensifying considerably.

This paper has merely provided a few examples. The intention has been to extend the concrete analysis of the relationship between alternative competitors and contestability of markets, and to initiate a discussion on the subject in relation to the evolution of global economic competition in shipping transport following the rise of intermodality, in particular in containerized transport.

The subjects dealt with here are increasingly the focus of attention for anti-trust legislation and policy and fair trading at European Union level (EU bodies and governments of member states).

Appropriate intervention is far from simple. In fact, it is easy to err and intervene inappropriately giving rise to results which are contrary - or at least different - to those intended.



1  See, for example: H.J. Molennars - E. Van de Voorde (eds.), Competition Policy in Liner Shipping, Antwerp (International Association of Maritime Economists - IAME), 1994; see in particular S. Gilman, Contestability and Public Policy in Liner and Short Sea Shipping, as far as concerns items b) and d) in the text.


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