Background
The growth patterns visible in India’s burgeoning economy suggest that this part is doing its job quite well because it encompasses numerous segments that in the future can continue to develop in parallel. India has strong connected sectors and has efficient growth in its economic sectors for the future. However, an emerging problem in this context is the maritime sector which has different problems in economic terms that should be solved. As per Last year’s Annual Report, while elaborating on the potential benefits of the maritime sector for India, the Ministry of Ports, Shipping, & Waterways highlighted that the industry accounted for 5% of the GDP. Then slowly it realises that this particular sector is not a revenue earner, but rather, a reinforcement of the Indian economy. Every step concerning the mastering of the antitrust regulations should be viewed as an integral subprocess that contributes to the existence of the stable and non-corrupt maritime industry.
The main part of this emerging sector is the Global Maritime India Summit held in Mumbai this year and launching ‘Maritime India Vision 2047’. The Vision dwells not only on its main objectives but also on the development of the shipping industry in India. It also establishes a new framework for competition within the sector’s regulatory authority. In a bid to secure the righteousness of fair competition, Vision 2047 calls for the setting up of tough regulations against mergers and acquisitions that have a monopolistic nature. This initiative reflects that the Competition Commission of India (CCI) plays a crucial role in the spheres of watching and regulating the maritime sector which in turn will keep it healthy and dynamic.
When teasing out the intricacies of the maritime sector, the most challenging task will be to tackle the difficulties that are involved in maritime freight transport. The fleet is mostly operated by two main types of shipping – bulk freight and container shipping lines. Bulk shipping centers on transporting a great volume of heavy goods like metal ore and coal for instance, whereas the container shipping line involves ordering of goods in containers against fixed shipping timetables. A maritime supply chain is multi cooperative sphere that includes ship registration, operations and maintenance, freight handling, and scrapping as its components. These sub-segments capture specific niches, reflecting the unique competitive strategies of the entities involved in their formation. This process is a key driver of dynamism in the sector.
The maritime sector has considerable fixed costs and tends to have another tradition of cooperation arrangements which sometimes permit it to be unduly concentrated with respect to power and cost structures. This has been worsened by the persistence of historical problems as the shortcomings in the infrastructure, inefficient ports, issues of economies of scale, and the constraint of the competitive markets still linger on. It has been observed in the past years, that ship owners have leaned towards horizontal consolidation by way of mergers and acquisitions and also, by integrating vessel carriers with container-handling terminals vertically. These patterns give a green light for an in-depth inspection into what shape the relevant market, which refers to the specific area of competition in a particular product or service within a geographic region, will take, the rights and duties of the existing players in the sector as far as regulation is concerned, and ways of improving market conduct.
Exploring the Nuances of Cooperative Agreements in Liner Shipping
The framework of the liner shipping market involves various interactions resulting from innovative agreements, which have evolved over time—from the early days of liner conferences to the widespread adoption of containerization. In the past, liner conferences played a key role by allowing shipping companies to work together on setting freight rates and schedules. However, the introduction of containerization transformed the industry, making cargo handling more standardized and operational processes far more efficient. This shift did more than just change how shipping lines operate; it also brought about new challenges that required changes in the regulatory landscape. As containerization reshaped the market, regulatory bodies had to adapt to the new realities of the industry—such as dealing with growing concerns over market concentration, mergers and acquisitions, and anti-competitive behavior. These regulatory changes were necessary to ensure that competition remained fair and that the industry could continue to grow without being dominated by a few large players.
This innovation revolutionized the industry by standardizing cargo handling and vastly improving operational efficiency, thus reshaping competitive dynamics and regulatory frameworks within the maritime sector. Sometimes, these pacts have evolved to become consortiums, strategic alliances, Capacity Stabilisation Agreements, Vessel Sharing Agreements, Slot Charter Agreements, Voluntary Discussion Agreements, and so on, tending to be diverse forms of cooperation among partners. Cross-sector collaboration is an important part of strategic management in the maritime industry. It aims to reduce costs and increase revenue. By doing so, it helps create a consistent cost structure for freight rates.
The collaboration of a cooperative agreement forms a dual, if not controversial, theme for many scholars and policy-makers. However, there are also some actions and opinions that see them as pro-competitive. The primary aim of these competitive strategies should be to enhance the competitiveness of exporters through anti-crisis programs that stabilize the economy, rather than seeking to devalue the currency. Attempting to devalue the currency can have far-reaching and potentially problematic implications. Not only is it challenging to achieve this through private entities, but it can also negatively impact the broader economy. Additionally, such devaluation could enable entities with larger market shares to engage in predatory pricing, undercutting competitors in the short term and raising monopoly concerns. Therefore, it is crucial to focus on stabilizing the economy through well-designed anti-crisis programs that foster a fair and competitive market environment. It would allow reducing the freight costs and result in an increase in competitiveness within the industry. While there are risks of violating competition protections, such as engaging in anti-competitive practices, there are also significant benefits to compliance.
It is also basic in the field of researching about these agreements, to refer to the definition given by The Convention on Code of Conduct for Liner Conferences (1974). It defines liner conferences as shipping organizations whose chartered vessels transport cargo between certain destinations through specified paths in the optimal sailing timing under one condition and the same freight rates. The definition of anti-competitive practices in the maritime sector includes key elem
ents such as market dominance, collusion, and potential price-fixing activities. Market dominance refers to a situation where a company holds a significant share of the market, reducing competition. Collusion involves agreements between competitors to limit competition, often leading to higher prices or reduced service quality. Potential price-fixing acts are arrangements between companies to set prices at a certain level, mirroring the behaviour of cartels that concentrate market power. These elements are crucial in identifying and categorizing anti-competitive practices within the industry
However, problems like exploitations of weaker competitors or damaged free-market competition, have been researched and highlighted in academic papers such as an important 2017’s study titled “An Analysis of Liner Shipping Network Efficiency through the Network of Contracts and Operational Processes“. However, cooperative agreements were shown to actually help with lower freight rates and greater consumer benefit when mathematical models were used to compute equilibrium prices, aggregate quantities, and welfare. In 2021, the nine leading carriers, prominent within the three major alliances and involved in over 500 partnership agreements, collectively oversee more than 86% of global container capacity. This substantial market presence, while illustrative of their significant influence, does not inherently suggest anticompetitive behaviour under competition law’s ‘Big is Bad’ principle. Any implication of market dominance should be framed in the context of potential abuses, rather than as a standalone observation. However, the existing concentration index, notably, the Herfindahl-Hirschman Index (HHI), in the global container supply chain remains moderate compared to other industries.
Competition Law Enforcement in the Maritime Realm
Section 3 of the Competition Act, 2002 explicitly prohibits anti-competitive agreements including horizontal and vertical agreements which the section dangers to be anti-competitive ones. This provision implies that any collusion in the liner and tramp shipping industries, such as cartel in the bid-rigging of combined fleets or vessel-sharing agreements, leads to concerns regarding extended antitrust control. The same fears can call for the need for regulation such as prohibition to enforce loyalty contacts, unfair pricing, disclosure of market-sensitive data, and deal or no deal agreements.
In light of recent concerns and CCI’s responsive actions, it is clear that there should be a substantial change in the maritime sector regime. The authority undertook various legal actions, including imposing fines on Japanese maritime companies for cartelization and approving significant mergers and acquisitions in the sector. These actions underscore the CCI’s active role in overseeing competition within the maritime industry
On a global basis, regulatory systems have taken the form of evolution. For example, the European Commission prior to now had discretion due to the Consortia Block Exemption Regulation (CBER) which granted immunities from rules of competition in the case of certain exemptions. Nevertheless, over time, percentages of efficiency have been decreasing, and the decoration of what is called transparency in the future will link to this specific change. Likewise, in the US, 1984’s first shipping statute exempted agreements between the freight providers and cartels, yet this narrow position was amended upon the introduction of an Ocean Shipping Reform Act, 2022 to curb the monopolistic activities of shipping associations.
Conclusion
Cooperative agreements in the liner shipping industry play a crucial role in balancing efficiency and fair competition. These partnerships—whether through vessel-sharing agreements, consortia, or other forms of collaboration—are essential for improving operational efficiency, reducing costs, and keeping the global shipping system running smoothly. However, as the industry evolves, especially with the widespread use of containerization, it’s clear that maintaining this balance is more important than ever. While containerization has revolutionized the way goods are transported, it also brings new challenges, particularly around ensuring that competition remains fair and that large players don’t dominate the market. This is where strong regulatory frameworks become key. As we’ve seen, lawmakers and regulators must constantly adjust to keep up with these changes, making sure that the industry benefits from the efficiency of cooperation without losing the competitive dynamics that drive innovation and fair pricing. In the end, the challenge for regulators and industry leaders alike is finding a way to support growth and efficiency while ensuring that the market stays open, competitive, and fair for everyone. Getting this balance right is essential for the long-term health and stability of the maritime sector.
This article is a part of the DNLU-SLJ (Online) series, for submissions click here.
Student, Lloyd Law College, Greater Noida
