Thursday, November 28, 2013

Freight Groups Ask US Regulator to Elicit Answers on P3 Container Shipping Alliance

Transatlantic Interests Want to Know if Federal Antitrust Authorities are Satisfied
Shipping News Feature

US – EUROPE – ASIA – Whilst other freight publications have speculated that the P3 agreement will be ratified by the Federal Maritime Commission (FMC) by next week, citing a lack of objections to the alliance being drawn up by the world’s three largest container shipping lines, we hear of at least one influential group who certainly have raised objections to the proposals, on both sides of the Atlantic. The proposed P3 Global Alliance, between Maersk Line, CMA CGM and Mediterranean Shipping Company (MSC), will be studied hard by antitrust authorities in Europe and the US and, as outlined in a previous story, the FMC has stated that it will pronounce on the deal on December 8, unless it decides to seek an injunction or simply refuses to ratify the agreement whilst it looks more closely at the terms and possible repercussions.

Now the Global Shippers Forum (GSF) whose members are represented in the US by the National Industrial Transportation League (NITL) and in Europe by the Freight Transport Association (FTA), has voiced its concern after tabling a series of questions about the arrangement with the FMC on November 26. The GSF has asked the FMC to pursue the questions with the parties of the P3 as part of its analysis into the competitive impact of the agreement on the market, and raised a number of questions outlining concerns by shippers on the potential competitive effects of the P3. GSF had previously submitted detailed questions to the European Commission Competition Directorate in Brussels, and has asked the EC competition authorities if they have commenced a formal investigation. GSF Secretary General, Chris Welsh, commented:

"The P3 Network Vessel Sharing Agreement is unprecedented in its scale and scope, many of the provisions of which are open-ended according to the agreement filed with the FMC. In the view of the GSF this may affect the commerce of the United States in its import and export trades. In light of this we believe the agreement warrants very careful scrutiny, and sincerely hope that the questions we have posed will assist FMC staff and Commissioners in its evaluation of the P3 agreement.

"While the GSF is concerned about the competitive impact of the proposed P3 Vessel Sharing Agreement, the GSF recognises that consortia and VSA’s that do not have the potential to eliminate effective competition can provide benefits to shippers in terms of enhanced efficiency, lower operating costs, increased frequency and a wider range of services available to customers.

"What is [however] also different and unique [in the P3 agreement] is the proposed creation of a London Network Centre. Our initial assessment raises concerns about how the P3 partners can compete because of the ‘commonality of costs’ which gives strong grounds for assuming common pricing. The more the costs are common, the greater the need for the P3 partners to demonstrate how they are going to compete on price. The key question is; are the P3 carriers able to demonstrate that the items that they refer to in the FMC filing: sales and marketing, EDI, back office, paperwork and customs, sufficiently significant to allow competitive pricing?”

The three partners will doubtless put up a spirited defence to the accusations that there may be collusion on rates simply because they are taking the opportunity to utilise economies of scale via a London ‘Control Room’ where bookings etc. can be handled more efficiently, whilst individual accounts, invoicing and the like remain under the control of the individual lines.

The parameters of the question asked by the FMC investigation are quite straightforward, will this alliance ‘by a reduction in competition produce an unreasonable reduction in transportation service or an unreasonable increase in transportation cost?’ That, the GSF says is what its latest series of questions are directed at eliciting an answer to.

Submissions on the matter have to be lodged through the FMC website.