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In November 2002, the European Commission granted an individual exemption for the revised trans-atlantic conference agreement (TACA) after it held that provisions in the agreement regarding service contracts and multi-carrier service contracts to be outside the scope of the block exemption. The elimination of conference’s role of enforcing tariff rates should improve slot utilization by promoting efficient pricing. This paper develops a backhaul pricing model to investigate the effect of confidential service contracts on the structure of liner market. In view of the increasing gap between head haul and backhaul freight rates in the European Union after year 2002, a linear joint pricing equation is numerically applied to the homebound and outbound freight rate indices at ports of Antwerp/Hamburg. This study finds that these freight rate indices moved in the opposite directions as it was predicted by the Smith’s condition of joint product, and the European liner market has become competitive after November 2002.In November 2002, the European Commission granted an individual exemption for the revised trans-atlantic conference agreement (TACA) after it held that provisions in the agreement regarding service contracts and multi-carrier service contracts to be outside the scope of the block exemption. The elimination of conference’s role of enforcing tariff rates should improve slot utilization by promoting efficient pricing. This paper develops a backhaul pricing model to investigate the effect of confidential service contracts on the structure of liner market. In view of the increasing gap between head haul and backhaul freight rates in the European Union after year 2002, a linear joint pricing equation is numerically applied to the homebound and outbound freight rate indices at ports of Antwerp/Hamburg. This study finds that these freight rate indices moved in the opposite directions as it was predicted by the Smith’s condition of joint product, and the European liner market has become competitive after November 2002.
