MARITIME ALLIANCES AND EU COMPETITION LAW

104 MARITIME ALLIANCES AND EU COMPETITION LAW a comparatively small market share by offering an inferior service at discounted prices) still represent the situation. However, this model is no longer applicable. As already mentioned above, though conferences remained an important factor in many trades, a decline in conference share (and a corresponding rise in non- conference market share) did not necessarily translate into appreciably greater competition since many independent operators have every incentive to merely price off conference rates rather than competing vigorously and independently with conferences on price. Furthermore, many smaller independent operator ser- vices may be inferior to those offered by Conference lines in terms of geographic scope and frequency of service. 118 Overall, their business practices were successful enough to undermined the capacity of the traditional liner companies to collude and generally challenged their as undisputed leaders in the liner market. 119 To do so, however, they have paid a price. The general principles of maritime economics, of the freight and newbuilding mar- kets in particular, are relevant to understanding how independent liner companies have managed to increase their own market share over time. The main motivation for an independent operator is to provide a service that is of equal or higher qual- ity than that offered by other liner companies. They have to offer bigger and faster vessels and attempt to realise economies of scale. This results primarily in borrow- ing for the renewal and the expansion of the fleet, or for meeting demands. The economic evidence weakens this argument. The fact that almost all shipown- ers are flexible enough to manage their fleet, either as members of a joint venture or as independents, is often overlooked. 120 The OECD Report (2002) 121 mentioned that, in contrast to what theoreticians of neo-classical competition law believe about dominance and price policy, freight rates clearly follow a deflationary course. In that report, Asia-US eastbound rates in 2001 were almost 12% lower than the 1993 levels and rates in the opposite direc- 118. Meyrick & Associates, “Economics of Liner Shipping Conferences: A Critical Review of the Literature and its Implications for Australian Policy” [April 1999] Australian Productivity Commission Inquiry into International Liner Cargo Shipping (A review of Part X of the Trade Practices Act) 239. <shippingaustralia.com.au/Portals/57ad7180-c5e7-49f5-b282-c6475cdb7ee7/Economics- LinerShippingConferences.pdf> [accessed 20 May 2019]. 119. OECD - Directorate for Science, Technology and Industry - Division of Transport, Report on Liner Shipping [Organisation for the Economic Cooperation and Development (OECD) DSTI/DOT 2002(2)] 20, 22-23, 44, 65 and Figure 4.6. 120. Blanco op. cit. n. 14 p. 467. 121. OECD Report (2002) op. cit. n. 119 p. 31-32.