The Global Shippers’ Forum (GSF) said it has officially raised concerns over the proposed P3 Global Alliance between Maersk Line, CMA-CGM and Mediterranean Shipping Co. by submitting detailed questions to the European Commission Competition Directorate in Brussels.
The container liner companies - the three largest in world - said in mid-June that next year they would form a long-term operational alliance on the three major East-West trades - transatlantic, transpacific and Asia-Europe.
GSF said it “is aware that the P3 members consider that their Global Alliance falls outside the EU consortia block exemption and therefore requires a more in-depth assessment. Accordingly, the GSF needs to be in a position to submit its views on the competition law and market impact issues that may arise from the proposed alliance.”
GSF did not immediately release the submission to the Competition Directorate, saying it was confidential at this time, but noted its purpose was to request the essential features and details of the P3 Global Alliance so the shippers' organization will be in a position to complete its own legal analysis of the proposed agreement.
GSF members include the largest shippers' group in the United States, the National Industrial Transportation League. Other members include the Canadian Industrial Transportation Association, Freight Transport Association in the United Kingdom, Consejo de Cargadores of Argentina, Union of African Shippers’ Councils, New Zealand Shippers' Council and Australian Peak Shippers' Association.
In particular, GSF has asked for confirmation from the EC competition authorities that it has commenced a formal investigation.
"We have raised these questions with the European competition authorities on behalf of shippers from all over the world because they are rightly concerned about the market impact of the P3," said Chris Welsh, GSF's secretary general.
GSF said “the question on every shipper's mind is ‘what will be the impact on my rates and the quality of services?'"
It said the proposed P3 Global Alliance is recognized in the shipping industry as a game-changer that will fundamentally change the structure and competitive state of the global container shipping market.
"Shippers are rightly worried about the potential of the P3 to eliminate effective competition in the world's main liner trades,” Welsh said. “We therefore need an in-depth assessment of the P3. That's why we are asking the European Commission to provide us with the essential details of the P3 and to confirm whether they have started a formal investigation or intend to do so. We need information and answers so that the GSF is in the position to protect the commercial interests of shippers internationally"
GSF said “in view of the nature of the P3, it is fully expected and understandable that other regulatory and competition authorities will want to analyze the agreement."
"GSF members are equally focused on expected future inquiries of other national competition authorities with competency and regulatory oversight of maritime transport sector, especially in Asia and in the United States where the Federal Maritime Commission is uniquely positioned to assess the potential competitive impacts of this never-before-seen aggregation of market share," Welsh said.
Earlier this week the FMC said that two of its five members - Chairman Mario Cordero and Commissioner William P. Doyle - met with the head of the U.S. Maritime Administration and one of the topics of discussion was the P3 Alliance.
Cordero stated the alliance has not filed any formal agreements with the FMC, and any proposed alliance will be subject to the review of appropriate agencies in the European Union, China and the United States.
Bruce Carlton, president and chief executive officer of the NIT League, said "we are anxious to know some of the details because we are somewhat anxious about the potential impact on the market. We could talk all afternoon about implications that could be spun out from P3—what are the non-P3 carriers going to do, how big and how pervasive is P3, how much of a share are we talking about, how in fact are they going to sell, market and price their liftings. The customer has a real stake in this.
"When an elephant walks through the room, the ground kind of shakes. And this thing looks like an elephant coming," Carlton added. "It is going to have a dramatic effect, I think. I don't know how it couldn't."
The market share of the proposed P3 Alliance on the Asia-Europe, transpacific all-water and transatlantic trades could dwarf that of rival alliances, according to the World Liner Supply Report issued by BlueWater Reporting in July.
At the end of the second quarter of 2013, the three prospective P3 members had a combined:
- 43.4 percent share of allocated capacity on the trade between Asia and Northern Europe.
- 50.1 percent of capacity on the Asia to the Mediterranean lane.
- 20.4 percent of allocated capacity from Asia to the U.S. West Coast.
- 28 percent of allocated capacity on the all-water route from Asia to the U.S. East Coast.
- 46.5 percent of the eastbound transatlantic to North Europe and 45 percent of the westbound transatlantic from North Europe.
- To the Mediterranean, they operated 51.3 percent of eastbound transatlantic capacity, and 51.5 percent westbound.
“Something that is as big as the P3, they are going have to
formalize this and deal with regulatory authorities in the various
markets, not the least of which is our FMC," Carlton said.
At the moment, the FMC is closed because of the shutdown of the federal government that has been going on since the end of September. In addition, the three carriers have not yet filed an agreement with the FMC.
“Even if the FMC was up and running, they don’t have anything to look at,” Carlton said. “It would be sort of shots in the dark. I think they probably want to have a focus before they start asking questions.”
"I dont think it is an overstatement to say that it has the potential to be one of the biggest game changers almost since the advent of containerization," said Peter Gatti, executive vice president of the NIT League. "What you are talking about here are a combination of some of the biggest ships every built, rationalizing sailings. The impact could really make this market a commodity based market more than ever before. And the question is, what about resulting impact on other carriers - how will they react to it? The P3 (members) are European carriers. What will Asian carriers due in response to secure and be viable in terms of market shares they operate?
"This is not your typical vessel sharing agreement," Gatti said. "Everyone has it on their radar screen."
Antoine Colombani, a spokesman for the EC Competition Directorate, said "the commission's preliminary investigation is ongoing. We are currently gathering market information and we have engaged in discussions with the parties."
On the announcement from GSF, he said "any third party that would like to make known its views - including any concerns it may have – can of course contact the commission."