The European Commission is allowing the P3 Network and G6 shipping alliances to move forward.
In a statement, Antoine Colombani, a spokesman for the Commission’s Competition Directorate said, “Members of all shipping alliances such as P3 or G6, to the extent that they do not benefit from an exemption, must themselves assess the legality of their agreements under EU competition rules. At this stage, the commission does not intend to open proceedings in relation to P3 or G6.”
He added that “the commission will follow market developments and will remain vigilant as regards any risks for competition that may arise from the implementation of P3 or G6. The commission will consider intervening if necessary.”
The world’s three largest container carriers — Maersk, MSC, and CMA CGM — first announced plans to form the P3 Network, which will allow them to share space on vessels moving between the major east-west container routes, last year. They will collaborate on the Asia-Europe, transpacific and transatlantic trades. That was followed by an announcement by the G6 carriers — APL, Hapag-Lloyd, Hyundai, MOL, NYK and OOCL — that they would expand their cooperation in the Asia-Europe and Asia-North America East Coast trades to include transatlantic and Asia-North America West Coast routes.
Under European Union law, shipping alliances such as the P3 do not qualify as a merger, but are subject to antitrust rules found in Article 101 of the European Union treaty. Shipping conferences that fix prices are banned in Europe, but vessel-sharing shipping consortiums benefit from a block exemption, if they have less than a 30-percent market share. (The market-share threshold was lowered from 35 percent in 2010.)
If an alliance has a market share greater than 30 percent, the
carriers must self-assess compliance with EU competition law. Article
101 provides exemptions to an agreement if it “contributes to improving
the production or distribution of goods or to promoting technical or
economic progress, while allowing consumers a fair share of the
resulting benefit, and which does not: (a) impose on the undertakings
concerned restrictions, which are not indispensable to the attainment of
these objectives; (b) afford such undertakings the possibility of
eliminating competition in respect of a substantial part of the products
in question.”
The Global Shippers Forum, an organization that includes shipper groups in a number of countries, including the National Industrial Transportation League in the U.S. and the Freight Management Association in Canada, said it welcomed confirmation that the European Competition Commission will closely monitor the P3 for compliance with EU competition rules
Chris Welsh, secretary-general of the GSF, said, “Effective monitoring of P3 compliance with EU competition rules is absolutely essential in view of the unprecedented market power of the world’s three largest lines that collectively represent over 40 percent market share in the world’s main liner trade, including over 46 percent market share in the Asia-Europe market. If there are any signs of a reduction in service quality or elimination in effective competition between the P3 lines and in the liner market generally, we would expect immediate action by the European Commission against the P3 lines including the imposition of appropriate sanctions for competition abuses.”
While the commission has been gathering information about the P3 and G6, it is not required to take a formal position, and a decision not to open antitrust proceedings at this stage does not prejudge its assessment of the alliances.
CMA CGM said the commission will “follow P3 to ensure it remains in compliance with EU competition law” and noted it is subject to regulatory review in jurisdictions in North America, Europe and Asia.
In March, the U.S. Federal Maritime Commission decided to allow the P3 Network agreement to become effective in the United States, and in April gave a similar nod to the G6.
CMA CGM said the P3 partners have been in voluntary discussions with the European Commission to confirm their view that the P3 is compliant with EU competition law.
“The P3 partners are pleased [with] the commission’s communication,” said CMA CGM in a press release. “The partners will now continue their close cooperation with competition and maritime authorities in amongst others, China and South Korea, to address questions and to explain the nature of P3.”
The P3 Network will operate about 250 ships with capacity of 2.6 million TEUs.
CMA CGM said, “Subject to the receipt of all relevant regulatory clearances (and the fulfilment of other conditions for completion), P3 is scheduled to start operations in the autumn of 2014.”
The GSF’s Welsh said the organization has asked the commission to “closely scrutinize the P3 to ensure the agreement is in line with the general provisions of the EU competition guidelines. We have also requested regular monitoring of the agreement and the provision of specific information by the P3 lines to assist the commission in monitoring compliance with the competition rules.”
GSF said it believes the P3 should assist the commission in monitoring compliance by providing reports on service performance on specific port pairs, vessel withdrawals including short-term withdrawals that might cause disruption to shippers’ supply chains, and information about future investment plans including future joint investment strategies that would impact on future capacity availability in the markets in which the P3 will operate.
“The P3 lines must now to step up to the plate and deliver on their promises of improved services and lower costs,” said Welsh. “Shippers will expect to see a wider range of services, enhanced service performance including improved service reliability and on time delivery. Above all, shippers expect to share in the benefit of more competitive freight rates through reduced costs.”
A.J. Braakman, a Netherlands-based attorney who wrote about the P3 Alliance in the Journal of International Maritime Law says “the self-assessment of the industry will have to cover a much larger area than the one that is presently covered by EU regulations and case law. This means that also the vigilance of the commission must extend to that wider area. As yet, the commission has not provided specific guidance to that effect.”
He said, therefore, the statement by Colombani “could be interpreted as to mean that the commission does not intend to provide specific guidance, but will wait for a specific case or cases in order to deal with the issues that will have to be addressed in respect of the wider area of application of EU competition law.”
Braakman said this approach leaves “the entire industry out on a limb. In my opinion, the best and quickest way of acquiring legal certainty is to lodge a complaint with the commission on the basis of which the commission will be obliged to address the aforementioned issues.”
No challenge to P3 in Europe
