Wednesday, July 4, 2018

Another Antitrust Case Fine for Logistics Group Over Shipping Line Improprieties

Cargo and Ro/Pax Ferry Deals Deemed Illegal
Shipping News Feature
PHILIPPINES – The Philippine Competition Commission (PCC) has nullified the acquisition by Chelsea Logistics Holdings of Trans-Asia Shipping Lines and imposed a PHP22.8 million (approximately $427,000) fine for their failure to notify the antitrust commission about the transaction in December 2016, after the PCC found that the deal would have constrained the local maritime trade.

According to the country’s competition laws, the parties should have informed the PCC before the acquisition had gone ahead, as Trans-Asia had gross assets of PHP1.142 billion, above the PHP1 billion threshold for compulsory notification of mergers and acquisitions.

The nullification of the Trans-Asia deal also led to PCC’s conditional clearance of a related transaction, the acquisition by Chelsea Logistics Holdings of KGLI-NM Holdings, which in turn controls ferry group, 2Go. This transaction involves the acquisition by Chelsea Logistics of shares in KGLI-NM to consolidate its majority ownership in KGLI-NM and gain a 52.98% stake in the 2Go group.

PCC’s investigation initially found that control of both 2Go and Trans-Asia by Chelsea would lead to a substantial lessening of competition affecting Roll-On/Roll-Off passenger shipping services (RoPax) in Cebu-Cagayan De Oro, Cagayan De Oro-Cebu, Cebu-Ozamis, Ozamis-Cebu, Cebu-Iligan and Iligan-Cebu legs; and cargo shipping services in the same areas plus the Cebu-Zamboanga lane. In these routes, 2Go and Trans-Asia overlap or compete directly with each other.

With the Trans-Asia agreements out of the picture because of the nullification order, the overlaps with 2Go in the 6 legs of passenger shipping services and 7 areas in cargo shipping services in Visayas and Mindanao found earlier in PCC Mergers and Acquisitions Office’s Statements of Concerns have been ruled out. At the time of going to press TransAsia’s website still records it as a Chelsea Logistics subsidiary.

In two separate Commission Decisions dated June 28, PCC ordered Trans-Asia to inform the antitrust commission within 30 days from execution of merger or acquisition agreements involving any of its shares after the nullification order. On the other hand, if Chelsea Logistics’ parent entity Udenna Corporation or any of its subsidiaries/affiliates pursue the purchase or re-execute the voided Trans-Asia deal, the parties should notify the transaction to PCC regardless of whether it is notifiable under the mandatory notification regime of the Philippine Competition Act. PCC Chairman Arsenio Balisacan, commented:

“Every M&A [merger and acquisition] notification subjected to PCC review is evaluated in a fair and transparent manner with the public’s welfare as foremost concern. There are sanctions for violations, there are clearances when there are no competition concerns.”

Chelsea is a wholly-owned subsidiary of Udenna Corporation. Through its subsidiaries, it is engaged in maritime trade and shipping transport. On the other hand, Trans-Asia is primarily engaged in domestic shipping by transporting passengers and cargoes.