Stolt-Nielsen Trasportation Group Case Solution

Also, it must be acknowledged that qualification criteria to term cooperation with the two competitors, Jo Tankers and Odfjell Seachem, as a monopolistic practice are a weak one. The combined market share of the three companies is not large enough to classify the cooperation as a monopolistic practice. Even though Stolt is the largest company in this particular market segment, it commands only 23% of the entire market. The other members of this non-competing agreement are Odfjell ASA of Norway with a market share of 18% and Jo Tankers AS of Norway possessing 9% of the market. The combined global market commanded by these firms is 50% only, which implies that even after entering into this agreement, these firms still have to face competition with numerous other suppliers serving half of the market. Also, the case for a monopolistic practice is also weak because the industry is catering to a niche rather than a mass market. However, one drawback of this non-cooperation agreement is that Stolt and Odfjell are family-controlled businesses which are always frowned upon by regulators. Two of OdfjelTs six board members belong to the founding family. Jo Tankers is a company that is not even public and all its equity is privately held.

The reason for me to go ahead with the cooperation is that in this particular business, it is very common and in several ways essential that competitors cooperate with each other for arrangements such as trade lanes, matters of sublets and in several forms of joint service agreements. When such a form of cooperation is common among industry players, it is difficult to quality certain verbal agreements pertaining to non-competition on certain routes by regulators. Also, it does not violate ethics that three firms agree not to interfere with each other’s existing clients in an industry where fixed costs are very high and low margins can very likely drive a firm out of business. In fact, such agreements can, in fact, benefit the clients by enabling firms to attain efficiency in certain regions, to pool resources for serving customers better and eventually to enhance operational efficiency.

Due to the above mentioned routine cooperation on load sharing, managers of these firms are in practice of meeting each other frequently. This implies that it is unlikely for regulators to trace non-competition agreements on a few clients where there are frequent meetings taking place already. Monopolistic charges are commonly levied on those firms which serve the public rather than operate in B2B niche markets. Monopolistic practices command greater attention when innocent customers are being taken advantage of by charging excessive margins. The trio of specialized shipping service providers deal with business clients of manufacturers and traders of chemicals, oils, pharmaceuticals and petroleum products which make very structured business decisions and keep a close eye on the cost incurred to them. Also, the cooperation agreement only pertained to the long-term contract market which is only 62% of the total market. Also, there is no evidence of excessive profiteering. Marius of Parcel tanker division 18%; Stolt Tank Containers division operates at 25% margin and Stolthaven Terminals’ Margins are 31%. The agreements were not motivated solely by profit purposes, rather they were also aimed to reduce issues of port congestion by decreasing operational overlap between major carriers and enhance the allocation of berth space in terminals. For the above-mentioned reason, I would have chosen to continue the cooperation with competitors in 2001.