The National Industrial Transportation League, the largest shipper organization in the country, is asking the Federal Maritime Commission (FMC) to closely examine the planned P3 Network that Maersk, MSC and CMA-CGM — the world’s three largest container shipping companies — plan to begin operating next year.
“While we recognize that the operational details of the P3 Alliance have not been released nor has their agreement been filed with the commission, this announcement has prompted questions and concerns among freight shippers about how the P3 Alliance could affect shipping markets across the world including the major U.S. trade lanes. The three carriers individually control substantial container capacity today, operate in all major markets and control substantial market shares in the world’s liner trades. Shippers are understandably concerned about the potential competitive impact on these trades if, and when, the three carriers implement this mega-alliance,” wrote Bruce Carlton, the president and chief executive officer of the NIT League in a letter to Mario Cordero, the chairman of the FMC.
Carlton said the NIT League has “long recognized the value of vessel sharing and other forms of carrier joint operating agreements, as they can be especially beneficial in bringing about operational efficiencies, reducing carrier operating costs and achieving optimal services for shippers. Such alliances certainly are not a new development. However, not all vessel-sharing agreements are the same, and each must be examined in isolation to ensure that the markets they serve are not impaired to the extent that they prevent or discourage new entrants or deny effective competition. This is especially true in key U.S. trades where the P3 Alliance carriers already enjoy limited antitrust immunity under the Shipping Act.
“The extraordinary market reach and potentially enormous concentration of market share these three large carriers would hold in a number of trade lanes has already moved some analysts to conclude the P3 Alliance could have substantial pricing and service impacts on shippers,” he continued. “Interestingly, however, respected analysts have come to opposite conclusions on the direction of those impacts. We believe it is incumbent upon the commission to reach its own findings on these very significant matters.”
Carlton noted that the Shipping Act “prescribes a process for the commission to submit its questions to the carriers and receive their replies without an opportunity for public participation.
“Nevertheless, we hope the commission will consider a more public inquiry into the issues we have raised here and consider consultations with other appropriate non-U.S. regulatory authorities to fully explore and understand the global impact of the alliance,” he wrote. “We believe these are prudent and necessary measures that will help insure the P3 Alliance meets both the appropriate goals of its members as well as those of the shipping public, which is dependent on competitive and efficient ocean transportation.”
NIT League urged the FMC to seek answers to these questions:
- What economic impacts will the P3 Alliance’s market share have on non-P3 carriers that currently compete for business, both globally and in individual trade lanes? And what are the likely competitive reactions of non-P3 Alliance carriers in trades where they compete head-to-head?
- Will the lawful discussion of market conditions (including freight rates) in the Asia/U.S. Transpacific Stabilization Agreement (TSA) have any impact on the day-to-day operational decisions of this mega-alliance, and will this unique privilege influence rates set by the P3 Alliance carriers?
- Will the dominant P3 Alliance market shares unduly influence rates, service levels and other market indicia in the trade lanes they will serve? Will the new and larger P3 Alliance vessels serve as a barrier to current and potential competitors from operating or entering markets served by the P3 Alliance lines?
- How will vertically integrated terminal operations of the individual P3 Alliance member lines be impacted, and what, if any, respective terminal cargo operations will be impacted?
- Will the likely rationalization of port calls force some non-P3 lines to reroute their vessels and perhaps drop selected services and port rotations?
- How do other liner carriers view the P3 Alliance and its impacts on their operations, pricing and profitability?
- Are other non-U.S. regulatory authorities conducting a review of the P3 Alliance? If so, what have they concluded about the impacts on competition in their respective markets?
