Friday, June 30, 2017

Another Container Shipping Freight Collaboration Seeks Approval

South African Rejection Does Not Deter Japanese Lines
Shipping News Feature
EUROPE – JAPAN – After news came last week of South Africa's decision to reject the proposed collaboration of Japan's three largest container shipping lines, the European Commission has approved, under the EU Merger Regulation, the creation of the joint venture between Nippon Yusen Kabushiki Kaisha (NYK), Mitsui OSK Lines (MOL), and Kawasaki Kisen Kaisha (K Line) in which the three freight carriers will cooperate.

The joint venture, or the ‘Ocean Network Express’ as it will be known as, intends to integrate the global container liner shipping activities and container terminal businesses (excluding their terminals in Japan) of NYK, MOL and K Line. The Commission concluded that the proposed acquisition would raise no competition concerns given the limited impact of the transaction on the routes to and from Europe and the fact that there would be sufficient competitive pressure from other competitors post transaction.

Scheduled to launch at the start of April 2018, the new entity will establish a holding company in Japan with the global headquarters based in Singapore. Additionally, regional headquarters will be set up in Singapore; Hong Kong; London, UK; Richmond, Virginia, US; and São Paulo, Brazil.

According to the three shipping companies, the move will allow the ONE to better meet its customers’ needs by providing high-quality, competitive services through the consolidation and enhancement of the three companies global network and service structures. The joint venture would operate a fleet totalling 1.4 million TEU, with a 7% of the global market share, placing the combined entity as the sixth largest container shipper in the world, behind the recently bolstered German shipping line Hapag-Lloyd, which last week completed the merger deal with UASC.

Though South Africa rejected the collaboration, Singapore approved the merger and now the parties await a formal decision from the US antitrust authorities (the US Department of Justice Antitrust Division and the Federal Trade Commission). The Federal Maritime Commission (FMC), with no power over the proceedings in the US, has expressed its concerns over a ‘merger without a merger’ type agreement that the FMC views this joint venture as being. K Line, MOL, and NYK are reportedly looking into their options with regard to the rejection in South Africa, which includes exiting the South African trade lane.