Service contracts, rate discounting, and the future of shipping conferences

The objective of this paper is to assess the impact of service contracts and rate discounting on the future of ocean linear shipping conferences. As a result of increased competition between ocean liner conference carriers and nonconference carriers and excess shipping capacity in the ocean liner container industry, conference carriers on many shipping lanes are engaging in rate discounting and negotiating service contracts with large shippers to obtain additional business. Often, these service contracts are entered into without the prior approval of the conference. Will the use of discounting and service contracts lead to the end of shipping conferences? Using economic theory, the conclusion is drawn that shipping conferences are likely to be weakened but not eliminated as a result of these practices.