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Integration and Competition between Transport and Logistics Businesses

image of Integration and Competition between Transport and Logistics Businesses

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

International Transport Forum

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.

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