Review of Industrial Organization 20: 51–59, 2002.
© 2002 Kluwer Academic Publishers. Printed in the Netherlands.
Rolling Seas in Liner Shipping
JAMES D. REITZES and KELLI L. SHERAN
The Brattle Group, 1133 20th Street, NW, Suite 800, Washington, DC 20036-3408, U.S.A.
E-mail: firstname.lastname@example.org and email@example.com
Abstract. This paper examines the current economic environment and recent legislative changes
in the U.S. international liner shipping industry, which has operated under antitrust immunity for
cartel agreements since 1916. Speciﬁcally, we address the impact of the Ocean Shipping Reform
Act (OSRA) of 1998, which increased cartel enforcement costs by reducing the transparency of
freight rates and mandating that cartel members have independent contracting rights. Our analysis
looks at industry trends and investigates whether OSRA has affected cartel membership, contracting
practices, horizontal integration, and freight rates.
Key words: Cartels, contracts, ocean shipping, regulatory reform.
While it may not be the last of the Mohicans, the international liner shipping
industry does represent one of the few remaining bastions of antitrust immunity
for coordinated pricing activity. Even this fortress is being raided, however. And
the early battles are foreshadowing potentially signiﬁcant changes in the balance
of power in liner shipping.
For over a hundred years, international liner shipping has been characterized by
the presence of the conference system, whereby ocean carriers get together to set
freight rates collectively. Partially in response to a more aggressive stance against
cartel market power, including efforts to constrain conferences by the U.S. Depart-
ment of Justice, the Shipping Act of 1984 was passed to clarify the boundaries
of antitrust immunity. That legislation reafﬁrmed the ability of conferences to ﬁle
agreements covering rates and service conditions, subject to oversight from the
Federal Maritime Commission (FMC) as to the agreement’s conformity with the
In 1998, the regulatory landscape changed dramatically with the passage of the
Ocean Shipping Reform Act (OSRA). Speciﬁcally, OSRA eliminated the FMC’s
dual roles as the repository of published rate information and the enforcer of
freight rates, and mandated that individual liner carriers could enter into conﬁd-
ential service contracts without interference from liner conferences. On its face,
OSRA reduced transparency in freight rates, removed the FMC’s cartel enforce-
We thank Mike Fusillo for invaluable help and comments.