Concept of Shipping Conferences in Logistics

The conferences are association of companies, resembling an ordinary cartel or  trust, formed to control supply and prices and to limit entry into the trade. The Royal  Commission  of 1909 defined  Shipping  ring or conference  as ‘a combination, more or less close of shipping companies  formed for the purpose of regulating or restricting competition in the carrying trade on a given trade route or routes’. Shipping  Conferences are formed only in a line trade  and not in the tramp service, because the former is a more stable and regular  organisation. Since the conferences are made for particular routes only, a shipping  company may join many conferences on different routes. Likewise, the shipping  companies may not join conference of a particular route and carry on independent  business. The organisation of conferences varies. It may be completely formal or  informal. A conference may have liners of various  nationalities as its members and their purpose of alliance might differ from  conference to conference.

Shipping Conferences in Logistics

To conclude that shipping conferences has two main objectives:

  1. To regulate competition between its members.
  2. To protect its members as a body against outside competition from tramps or  non conference lines.

Advantages of Shipping Conferences

  1. Prevention of competition and protection of weaker lines:  The organisation  of conference regulates the competition among the liners by entering into  agreements on subjects like fixation of rates, allocation of traffic and other  sailing conditions. It curtails the unhealthy competition among the liners and  protects the weaker liners, which otherwise would have been ousted in free  competition. This also protects the liners against outside competition,  particularly due to deferred rebate system, which makes the big shippers  loyal to the conference lines.
  2. Regular sailings:  The conferences have promoted regularity of service, better  distribution of sailings and fixed timings. In turn, when the shipping  companies are assumed of sufficient amount of traffic their cost of operation  goes down and they are in a position to introduce better vessels and facilities  for the shippers. Moreover, when shippers become loyal to the conference  lines, it becomes obligatory on the part of the shipping companies to provide  sufficient accommodation and  organize  sailings efficiently to meet the  requirements of the shippers.
  3. Stability and infirmity of rates:  The regulation of rates and traffic not only  reduces the competition and unhealthy practice of rate — cutting but also  leads to  stabilization  and uniformity of rates. Stability of rates is a great  advantage to the shipping companies as it enables them to calculate their  income more reasonably and accurately. It is also advantageous to the  shipper who can calculate freight cost more exactly in their cost structure.  The fluctuating rates hamper the development of international and national  trade.
  4. Increase in sailings:  When the shipping companies are not under the constant  threat and danger of cut throat competition they try to promote sailings in  accordance with the real needs of the traffic. New routes are served and new  commodities are carried which also become remunerative in course of time.

Disadvantages of Shipping Conferences

  1. Creation of shipping monopolies:  The conference agreements and deferred  rebate system enabled many lines to create monopolies. By acquiring  monopolies powers they compete with tramps and non conference lines.  They have prevented the establishment of new lines and crushed non  conference lines. They exert arbitrary power over rates, domestic shippers  and become careless in providing proper service. They sometimes grant  special rates and accommodate to large shippers and refuse to publish tariff  and classification.
  2. Preferential treatment:  The shipping conferences have given preferential  treatment to some big shippers and  favored  them as against the other  shippers. The deferred rebate system in itself is a preferential treatment, but  the shipping rings offered other concessions and  favor  beyond the  reasonable rates of deferred rebate.
  3. Against independent shipping:  The policies adopted by these conferences are  anti social and detrimental to the free and independent shipping business.  The deferred rebate system compels the shippers to patronize and sponsor  only the lines of the conference. This restricts the new entrants in shipping  and the old non conference lines become so powerless and helpless that they  have to close their line. Moreover, in the absence of competition, stagnancy  and inefficiency among conference lines usually creep in. the shippers who  are  favored  by these lines also monopolize in international trade in those  commodities on certain routes as others cannot compete with them. Thus the  policies and practices adopted by the conference lines are against the  independent growth of shipping and international trade.

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