Global trade network symbolized by container ships and gears.

Shipping Cartels: How They Shaped the Modern Global Economy and What We Can Learn From Their History

Soraya Malik in Business & Economy December 2025 • 4 min read.

"A deep dive into the container shipping industry reveals the surprising role of cartels in fostering global trade and economic integration."

The ocean-going shipping industry, a cornerstone of international trade, bears the weight of global economic progress. Its history, predating modern competition law, operates on the principle of 'freedom of shipping,' advocating for open access and minimal government intervention. Yet, beneath this veneer of free trade, international cartels, known as 'shipping conferences,' have quietly shaped the industry for over 130 years.

A recent study by Suguru Otani investigates the profound impact of these cartels on the container shipping market. Otani's research uncovers how these cartels, through strategic price manipulation and investment incentives, played a pivotal role in forming one of the most globally integrated markets. By examining the historical dynamics of entry, exit, and shipbuilding investment, the study sheds light on the complex interplay between cartels and market development.

The research uses a novel dataset and structural model to analyze the behavior of shipping firms and the effects of cartelization. Otani's findings challenge conventional wisdom, suggesting that cartels, while often criticized, may have fostered market growth and improved social welfare under certain conditions. These findings offer valuable insights for policymakers navigating the intricacies of industrial policy and competition law.

The Rise and Fall of Shipping Conferences: Cartels in Action

Global trade network symbolized by container ships and gears.

Shipping conferences, the explicit cartels of the container shipping world, wielded significant influence through controlling prices and quantities. They operated by establishing agreements on freight rates and managing vessel allocation, essentially stabilizing the market by reducing competition among member firms. This practice, however, drew scrutiny as global containerization lowered entry barriers for new companies, particularly those in developing countries.

The 1970s marked a turning point as the United Nations sought to include new shipping companies in these conferences, challenging the existing power structures. By the 1980s, deregulation policies, such as the U.S. Shipping Act of 1984, aimed to dismantle the collusive regimes by allowing individual agreements between carriers and shippers. This shift from collusion to competition triggered a 'container crisis,' characterized by plummeting shipping prices.

Pre-1984: Shipping conferences operated with significant control over prices and quantities.
Post-1984: Deregulation led to increased competition and price reductions.
Global containerization: Reduced entry barriers, enabling developing countries to participate in the shipping industry.

Otani’s study meticulously examines this transition, dissecting the effects of cartel breakdown on prices, firm behavior, and overall welfare. By constructing a unified dataset from diverse sources, the research overcomes previous data limitations, offering a comprehensive view of the industry's evolution.

Lessons from the Past: Charting a Course for Future Policy

Otani’s research underscores the nuanced role of cartels in shaping industries. While often viewed negatively, shipping cartels may have facilitated market growth and investment during the early stages of the container shipping industry. The study calls for a balanced approach to industrial policy, recognizing that centralized mechanisms for price and quantity control may not always be detrimental. This nuanced understanding is crucial for fostering competition and maximizing social welfare in dynamic, evolving markets. Further research should compare the current model with data that incorporates more institutional details and data.

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This article is based on research published under:

DOI-LINK: https://doi.org/10.48550/arXiv.2407.15147,

Title: Industry Dynamics With Cartels: The Case Of The Container Shipping Industry

Subject: econ.gn q-fin.ec

Authors: Suguru Otani

Published: 21-07-2024

Everything You Need To Know

What were 'shipping conferences' and how did they operate within the container shipping industry?

Shipping conferences were explicit cartels within the container shipping industry. They functioned by establishing agreements on freight rates and managing vessel allocation. This allowed them to stabilize the market by reducing competition among member firms. In essence, these conferences centrally controlled prices and quantities, a practice that drew scrutiny as global containerization lowered entry barriers for new companies, particularly those in developing countries.

How did deregulation, specifically the U.S. Shipping Act of 1984, impact the container shipping market?

The U.S. Shipping Act of 1984 was a pivotal deregulation policy that aimed to dismantle the collusive regimes of shipping conferences. This act allowed individual agreements between carriers and shippers. The shift from collusion to competition triggered a 'container crisis,' characterized by plummeting shipping prices. Before 1984, shipping conferences had significant control over prices and quantities; afterward, increased competition led to price reductions.

What role did global containerization play in challenging the established power of shipping conferences?

Global containerization reduced entry barriers for new companies, particularly those in developing countries. This shift challenged the established power of the shipping conferences. The United Nations sought to include new shipping companies in these conferences in the 1970s, which further complicated the existing power structures. This eventually contributed to the push for deregulation and increased competition within the industry.

According to Suguru Otani's study, how did shipping cartels influence the container shipping market's development, and what were the implications of these findings?

Suguru Otani's research indicates that shipping cartels, known as shipping conferences, played a pivotal role in forming one of the most globally integrated markets through strategic price manipulation and investment incentives. The findings challenge conventional wisdom by suggesting that these cartels may have fostered market growth and improved social welfare under certain conditions. This implies that a balanced approach to industrial policy is crucial, recognizing that centralized mechanisms for price and quantity control may not always be detrimental, which is crucial for fostering competition and maximizing social welfare.

What lessons can policymakers learn from the history of shipping cartels and the evolution of the container shipping industry?

Policymakers can learn that the role of cartels in shaping industries is nuanced. While often viewed negatively, shipping cartels may have facilitated market growth and investment during the early stages of the container shipping industry. A balanced approach to industrial policy is essential, recognizing that centralized mechanisms may not always be detrimental. Understanding the historical dynamics of entry, exit, and shipbuilding investment offers valuable insights for fostering competition and maximizing social welfare in dynamic markets.