Merger waves and alliance stability in container shipping
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Merger waves and alliance stability in container shipping Daniele Crotti1 · Claudio Ferrari2 · Alessio Tei3
© Springer Nature Limited 2019
Abstract Recently, the container shipping industry has been witnessing a wave of new mergers and reshuffling of cooperation agreements (alliances), which have heavily affected the market. This development has also taken place among vertically integrated carriers, thus affecting not just the shipping side of the business, but the different supply chains as well. By using non-cooperative merger control games, featuring carriers involved in strategic alliances and competition authorities, this paper analyses the impact of the vertical integration of carriers and terminal operators on the stability of alliances. Starting from a benchmark set-up where carriers and stevedores are separated, we first find that when the integration concerns merging carriers only, alliance stability is undermined because non-merging allied carriers are more likely to register losses due to market share reductions and possibly higher terminal tariffs. However, by assuming that alliance agreements are extended to terminal operations, for all the allied partners, we show that alliances might be more stable, since non-merging carriers are vertically integrated as well and can internalize terminal charges. Given the on-going trends of consolidations in container shipping, this last hypothesis implies that merger waves might still occur without the breaking down of alliances, as long as landside cooperation among carriers along the supply chain, is also considered. Keywords Container shipping · Vertical integration · Strategic alliances · Endogenous mergers · Merger control
* Claudio Ferrari [email protected] 1
Department of Economics, Insubria University, Via Monte Generoso 71, 21100 Varese, Italy
2
Department of Economics, University of Genoa, Via Vivaldi 5, 16126 Genoa, Italy
3
School of Engineering, Newcastle University, Queen Victoria Road, Newcastle upon Tyne NE17RU, UK
Vol.:(0123456789)
Maritime Economics & Logistics
1 Introduction Since the 1990s, ocean carriers have largely resorted to strategic alliances to exploit global demand opportunities and achieve joint efficiencies at sea (Notteboom et al. 2017; Caschili et al. 2014; Slack et al. 2002). Quartieri (2017) pointed out that “the formation and enlargement of these consortia do not alter the average variable cost of a carrier but spread it over all the members yielding a decrease in each carrier’s marginal cost”, ultimately positively impacting on the possibility to compete in the market. Thus, this form of horizontal cooperation entails benefits in terms of cost savings and wider network organization, but implies challenges as well. Mainly designed to take advantage of vessel sharing arrangements, strategic alliances do not include price fixing, joint sales or sharing of profits (Panayides and Wiedmer 2011). Therefore, the stability of alliances relies upon an efficient design of agreements that motivate carriers
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