As Newton described it in his third law, for every action there is an equal and opposite reaction.
Or as shipowners explain it — beware unintended consequences.
Shipping regulation is difficult and largely reactive to problems that have already occurred.
But it is a fact that regulators have a track record of regulating shipping badly. They see a single problem and they try to solve it, failing to follow up the long list of problems they create in doing so.
The European Commission’s move to allow the consortia block exemption regulation to expire certainly resolves a long-running dispute between carriers and their shipper and forwarder customers.
But it remains to be seen whether the result will be as positive for shippers as they had hoped for or whether the law of unintended consequences will apply.
The problem is that they are looking in the rear-view mirror to solve a problem rather than concentrating on what the consequences of their action might be.
We saw a similar approach when regulators decided to start coming down hard on demurrage and detention — essentially the charges applied when a container is held beyond the time agreed. They did this to fix congestion when congestion had already eased and demurrage and detention is designed to keep the free flow of boxes.
In ending the consortia exemption, they are trying to raise competition in a manner that could, in a worst-case scenario, lead to less competition. Forced to act alone, the lines are left to fight for market share through a brutal rates war that eventually leads to a Hanjin-style collapse and further consolidation.
Of course, it might not. But by trying to provide shippers with more choice and more services, the commission may have just sparked a series of unintended consequences that lead to fewer port pairs, fewer choices and inevitably higher rates.
As always in shipping, be careful what you wish for.
Richard Meade
Lloyd’s List editor-in-chief
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