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Simulating mergers between stevedores

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Maritime Economics & Logistics Aims and scope

Abstract

Using a discrete-choice perspective and emphasizing the differentiated-goods nature of container handling, this article empirically studies the price and welfare effects of the 2001 merger between Antwerp-based container handlers Hessenatie and Noord Natie. Results show that: (i) the merger between Hessenatie and Noord Natie causes relatively small price increases and losses to consumer surplus and total welfare, confirming the clearance of the merger by the Belgian Competition Authority; (ii) increased substitutability among container handlers and more realistic shipper/carrier substitution patterns tend to mitigate welfare losses from mergers in this industry and; (iii) allowing for post-merger costs savings, price decreases passed on to shippers/carriers entail significant increases in both consumer surplus and total welfare. Additionally, market power is shown to be more sensitive to changes in inter-handler substitutability than increasing complexity of consumer substitution.

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Notes

  1. At the time of writing, the port of Antwerp handled some 4.2 million TEU, ranking eleventh in the world and third in Western Europe, behind Hamburg (4.7 million TEU), and Rotterdam (6.1 million TEU).

  2. See Van Cayseele (2005, p. 187). At the heart of the discussion lies the concept of the continuous chain of substitution as stated by the 1997 EC Guidelines on Market Definition. The argument goes that two non-competing parties A and C may actually end up being in the same market because of the presence of a third player B, positioned in between.

  3. See, for example, the Commission's ruling in case COMP/M.3575-ECT/PONL/Euromax 22/12/2004, stating that The widest realistic range would be Hamburg-Le Havre. This range was supported by most terminal operators in the market test.

  4. On 25 September 2006, the European Commission decided to repeal Regulation 4056/86 detailing the application of Articles 85 and 86 of the Treaty of Rome to maritime transport, thereby ending the block exemption for liner carriers to collaborate in conferences, fix prices and regulate capacities from October 2008 onwards.

  5. For an empirical analysis of the impact of handling charges on shipping rates, in particular their usefulness as a cartel-enforcing device, see Fung et al (2003). Note that the freight rate is defined by Fung et al (2003) as the sum of ocean freight rates and THCs.

  6. In a case where the simulation is preceded by the estimation of a discrete-choice demand with unobserved product characteristics, endogeneity issues have to be addressed by the use of proper price instruments, see for example Berry (1994) and Berry et al (1995). This is less of an issue here, however, as the values for β are arbitrarily chosen.

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Acknowledgements

Part of this article draws from my MSc dissertation at the K.U.Leuven (Reynaerts, 2007) and a policy-oriented account of the HNN merger for competition law practitioners (Reynaerts, 2008). I thank Patrick Van Cayseele and Maarten Goos for valuable comments and suggestions. Financial support from the K.U.Leuven Research Fund (EF/05/001) is gratefully acknowledged.

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  1. LICOS Centre for Institutions and Economic Performance, Katholieke Universiteit Leuven, Debériotstraat 34/3511, Leuven, B-3000, Belgium

    Jo Reynaerts

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Reynaerts, J. Simulating mergers between stevedores. Marit Econ Logist 12, 8–35 (2010). https://doi.org/10.1057/mel.2009.17

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