A broken record is a good thing if you are Aaron Judge hitting a record-breaking 62nd home run, as he did this past October to end Roger Maris’ 61 year reign as the American League’s single- season home run king. But the broken record I have in mind is the type that repeats the same refrain over and over…and over again. At risk of sounding like a broken record (or, for our colleagues of a younger generation, let me call it “damaged vinyl”), the most concerning supply chain challenge continues to be surety of access to competitive and reliable ocean transportation.
There are various strategies that businesses pursue to increase the chances of having access to ocean transportation and to reduce the odds of leaving valuable product sitting on the warehouse floor, but it can still be similar to rearranging the deck chairs on the Titanic. Contributing to this futility is the endurance of ocean common carriers’ immunity from antitrust regulations in the US and similar protections in other parts of the world.
While vessel sharing agreements and other cooperations among carriers have the potential to bring benefits to the shipping public, their existence alone does not guarantee quality ocean transportation or lower cost. In fact, we have seen the poorest of performance and the highest of freight costs — more broken records! — during these past years when just three alliances have controlled between 80 and 90% of the ocean transportation network. We have seen how, when carriers of an alliance agree amongst themselves to “blank” sailings or bypass a port, a seismic jolt runs through our supply chains, often with few to nil options for recovery or replacement via competitive offerings in the marketplace.
Following years of consolidation in the industry, when individual ocean common carriers today are themselves of a magnitude that rivals entire alliances of years past, it is worth considering that today’s alliances may be too big to bring anything but an unhealthy oligopolistic control of this essential industry. Having said that, and despite claims by the World Shipping Council, who defend the interests of their carrier members, it is untrue that the current wide-reaching antitrust protections are legal prerequisites for the existence of vessel sharing alliances. The door for cooperation among ocean common carriers needn’t be shut, but the right to walk through it should be justified, earned, and subject to independent periodic review to ensure that the result is an improved ocean transportation network that brings benefit not to ocean carriers’ shareholders but to businesses and industries whose trade relies on ocean transportation.
We can save the Titanic from sinking if we repeal the existing antitrust immunity and see what records the ocean common carriers can then break while they compete to serve the shipping public.