ITF Round Tables

International Transport Forum

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ITF Roundtable Reports present the proceedings of ITF roundtable meetings, dedicated to specific topics notably on economic and regulatory aspects of transport policies in ITF member countries. Roundtable Reports contain the reviewed versions of the discussion papers presented by international experts at the meeting and a summary of discussions with the main findings of the meeting.

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Integration and Competition between Transport and Logistics Businesses

Integration and Competition between Transport and Logistics Businesses You do not have access to this content

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26 Feb 2010
9789282102619 (PDF) ;9789282102596(print)

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Some very large multinational transport and logistics firms have emerged to provide integrated transport services to shippers in the globalised economy. Do these firms escape regulatory oversight from national competition authorities because of their sheer scale? Do they pose additional threats to competition when they merge with or acquire other companies in the supply chain?

The Round Table brought competition experts together with researchers on maritime shipping, rail freight and logistics to identify critical competition issues and appropriate regulatory responses. An examination of the strategies of transport and logistics companies reveals that vertical integration can yield efficiencies, but usually reflects a need to improve the use of expensive fixed assets rather than control all parts of the supply chain. This usually explains why shipping lines acquire terminal operators. Horizontal acquisitions, where similar companies serving the same market merge, are more likely to raise competition concerns. Problems are particularly prone to arise at bottleneck infrastructure facilities.

The Round Table report provides an economic framework for examining competition in global transport and logistics businesses, discusses the adequacy of the remedies available to regulators when competition is threatened, and explores the role of competition authorities and Transport Ministries in ensuring markets are efficient.

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  • Summary of Discussions
    The Round Table, chaired by Russell Pittman of the US Department of Justice, reviewed trends in horizontal and vertical integration in logistics businesses, maritime shipping, ports and rail freight transport and examined the circumstances in which integration might reduce the efficiency of the transport system. There are likely to be net benefits to society from such integration in competitive markets but if integration eliminates competition, market power might result in excessive prices, suboptimal investment and lower than optimal levels of service for the users of transport services. Options for sector specific regulators and competition authorities to manage the risks of market abuse were discussed and the adequacy of antitrust law and competition authorities to take remedial action should businesses exploit market power were assessed.
  • Empirical Evidence for Integration and Disintegration of Maritime Shipping, Port and Logistics Activities
    In 50 years, containerisation has become the backbone of globalisation. That it has done so can be attributed to the beneficial interaction of three broad types of factor: technical, economic and organisational. In the beginning, containerisation was nothing more than a simple technical innovation. However, as an intermodal tool, the container paved the way for new and long-term organisational models in the transport sector. These organisational factors challenged transport actors, who had to redefine the demarcation lines between their respective businesses in order to bring reliable door-to-door transport chains with a global reach into operation. The opportunities that containerisation offered would have remained a dead letter had they not coincided with the deep upheavals in economic factors since the 1970s. The very strong growth in international trade in manufactured products, systematically higher than growth in international trade overall – itself higher than GDP growth – marks a deeper division in international labour, which was made possible only through the support of a strong transport system.
  • Market Power and Vertical and Horizontal Integration in the Maritime Shipping and Port Industry
    The maritime sector is undergoing constant change, as is particularly apparent in the shift in competition that has unfolded in recent years. Whereas in the past shipowners and ports used to compete with one another, the competitive struggle is now increasingly unfolding at the level of logistics chains. Today, market players are selected not so much for their stand-alone competitiveness, but on the basis of whether or not they belong to a successful maritime logistics chain. This explains why certain market players are continuously trying to gain greater control over these chains, including through vertical and horizontal alliances, mergers and acquisitions. 
  • Railway and Ports Organisation in the Republic of South Africa and Turkey: the Integrator's Paradise?
    There seems to be an inevitable tendency among transport experts to focus on "their" part of the production system without looking at transport from the point of view of the customer – the shipper/receiver. The result is often either a fascination with pieces of technology or a focus on a single mode. From this point of view, concerns for "efficiency" and economies of scale tend to dominate, while the functioning of the entire door-to-door network, and especially the issues of competition within the network, often receive short shrift. One purpose of this Round Table is to correct this. 
  • Are Horizontal Mergers and Vertical Integration a Problem?
    This report examines market power in rail markets in Europe arising from horizontal and vertical mergers in the sector, and was intended to provide a high-level basis for discussion at the Round Table itself. It presents factual information on horizontal and vertical merger cases involving rail freight operators, and highlights the processes used by competition authorities to determine the circumstances in which such mergers should be approved. It also provides commentary on the economics of these markets and, hence, the likely prospects for their future shape.  
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