Ocean shipping reform act promotes competition in the trans-Atlantic trade route

Substantial pro-competitive changes were made to the Shipping Act by the Ocean Shipping Reform Act (OSRA). Of these changes, the most notable was the shift away from public tariffs and publicly available contract rates to confidential rates using individually negotiated service contracts. The number of individual member service contracts has risen dramatically since OSRA went into effect in 1999. These statistics from reports of the European Commission support the argument that OSRA was able to instill more competition into the industry. However, the empirical evidence on the Act's success in improving the performance of the containerized liner industry serving the Trans-Atlantic trade route is not so compelling. This paper applies the theory of joint product to assess the impact of OSRA on the structure and competition of shipping market after 1999. Trans-Atlantic eastbound and westbound routes were regarded as joint products. A simple statistical equation is derived to reinterpret Smith's condition of joint product. Empirical results obtained confirm the competitive market structure of the Trans-Atlantic trade route.

► Substantial pro-competitive changes were made to the Shipping Act by the Ocean Shipping Reform Act.
► This paper considers round-trip container shipment as an example of joint product.
► A statistical equation is derived to reinterpret Smith's condition of joint product.
► Empirical results confirm the competitive market structure of the Trans-Atlantic trade route.