COSCO-OOCL as one gets clear path

Companies will have less paperwork and be able to work more closely after merger.

   COSCO Shipping Lines and Orient Overseas Container Line (OOCL) will have less regulatory paperwork to perform and will be able to work as a single entity as a result of a decision announced Wednesday by the Federal Maritime Commission.
   The FMC has granted a request by the two companies, which are combining, for an exemption that they file agreements between them “because the requested exemption will not result in substantial reduction in competition or be detrimental to commerce.”
   The decision involved two related companies — OOCL and OOCL (Europe) — that jointly provide service under the OOCL name, as well as COSCO.
   COSCO is acquiring a majority stake in OOCL, but says it plans to have the parent company of OOCL, Orient Overseas (International) Ltd. (OOIL), retain its public listing on the Hong Kong Stock Exchange by having 25 percent of its stock owned by other parties. However, COSCO’s parent company, COSCO SHIPPING Holdings Co. will be the majority owner of OOIL and control OOCL and be a common business enterprise.
   Section 535.307 of the Shipping Act exempts  “all agreements between or among wholly-owned subsidiaries and/or their parent.” Given COSCO’s control over OOCL, the companies argued granting an exemption to them was justified by the same rationale the FMC used when it originally adopted 535.307.
   The FMC agreed, saying “Because agreements between COSCO and OOCL or OOCL (Europe) would not raise implications under § 1 of the Sherman Act, granting petitioners an exemption akin to Section 535.307 would not, in this specific instance, result in a substantial reduction in competition or be detrimental to commerce.”
    The two companies will not have to file duplicate agreements for things such as space sharing, and will not be subject to Section 41105 of the Shipping Act  “to the extent that those activities result solely from agreements between or among COSCO and either OOCL or OOCL (Europe), or both.” Section 41105  normally prohibits various sorts of concerted action by a conference or group of two or more common carriers.