Shipper groups are calling for the proposed “P3 Network” between the world’s three largest container carriers - Maersk, Mediterranean Shipping Co., and CMA CGM - to be scrutinized by regulators.
The three companies said earlier this week they want to begin an operational alliance in the second quarter of next year on the major East-West shipping lanes.
The Global Shippers Forum (GSF) said in a statement today it “will ask international regulators, including the European Commission, the U.S. Federal Maritime Commission (FMC) and other relevant national regulators to thoroughly analyze the proposed P3 Agreement because of the potential competition issues raised.” The National Industrial Transportation League, the largest shipper organization in the United States, is one of the founding members of the GSF.
“The scale and global reach of the P3 is unique: involving the world’s top three container operators on the world’s three major trades with market shares far in excess of the EU consortia block exemption threshold of 30 percent and the 10 percent threshold normally applied in the economy more generally which would automatically trigger an inquiry on competition grounds,” GSF said.
“P3 market shares are reported to be between 40-45 percent in the Asia-Europe market, but are likely to be much higher in many North-South trades and niche markets. For example, in New Zealand liner markets P3 market shares are likely to be as high as 70 percent.”
The P3 carriers, however, said the operational alliance would operate on only three trade lanes: Asia-Europe, Transpacific and Transatlantic.
The European Shippers Council (ESC) and Asian Shippers meeting, which represent various shipper groups on those continents, also expressed "deep concern" at the announcement by the big three carriers this week.
"This cooperation should in no way jeopardise or impair the free choice of shippers and fair competition based on price, service level and routing," the two groups said.
Mario Cordero, chairman of the FMC, told American Shipper
in an interview this week that once the three carriers file an agreement for the P3, it will be scrutinized by the staff and "at some point the commission will weigh in."
"Our concern is that it does not result in unreasonable increase in rates or unreasonable decrease in service," he explained.
The FMC will examine whether the alliance is positive or negative for port coverage, sailings, capacity, and transit times.
Cordero also noted bigger ships could be positive for the environment.
GSF said “it would be prudent for competition and regulatory authorities to access the impact of capacity manipulation, exchange of information or data or rate discussions, especially in relation to the trades subject to EU competition law, arising from all the member lines belonging to the Transpacific Stabilization Agreement where the lines are understood to consider themselves entitled to discuss rates rather than freely fixing rates through "fully independent sales, marketing and customer service functions."
GSF said it will “ask the European Commission to be vigilant with regard to any informal advice that the P3 lines may request in the context of their self-assessment in the context of the EU Consortia block exemption regulation currently under review, with one possible outcome of that review being its repeal by the European Commission.”
Mark Cooper, director of research at the Consumer Federation of America, told American Shipper
that if “three leading firms have a market share north of 40 percent and they enter into an agreement that has the possibility of reducing their incentive to compete or increasing their power over price, it is going to get the attention of regulators, whether it is a merger or a joint venture.”
Many other carriers have formed alliances in recent years: the Grand Alliance (GA) of Hapag-Lloyd, NYK, and OOCL; New World Alliance (NWA) of NOL, MOL, and Hyundai; G6 Alliance which combines the GA and NWA members; and the Green or CKYH Alliance of COSCO, “K” Line, Yang Ming, and Hanjin. - Chris Dupin