News / P3 Alliance gets EU green light, despite shipper worries, and looks to China next

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The east-west P3 vessel-sharing agreement between the world’s three biggest container carriers has cleared its second regulatory hurdle, the EU Competition Commission.

The European Commission informed Maersk Line, MSC and CMA CGM yesterday it had decided not to investigate the P3, and its alliance rival the G6, over any antitrust issues.

However, competition commission spokesman Antoine Colombani said: “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.”

A joint statement from CMA CGM and Maersk Line, released this morning, explained that under European antitrust laws, the 2.6m teu capacity network had been required to conduct a self-assessment of its compliance with competition regulations, which the EU commissioners had signed off.

The European green light for the P3 could be seen by shippers as a blow – the Global Shippers’ Forum (GSF) had filed a complaint with the competition commission on behalf of members who feared the alliance’s market dominance would eliminate effective competition. The three P3 lines will control around 50% of the Asia-Europe market and 30% of the transpacific corridor.

The GSF said today it welcomed the EC’s promise to “closely monitor” the way the market develops.

Secretary general Chris Welsh told The Loadstar: “The commission has listened very carefully to us. It doesn’t need to do anything unless it feels that there are grounds for it to do so.

“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 a greater than 40% market share in the world’s main liner trade.

“If there are any signs of a reduction in service quality or elimination in effective competition between the P3 lines – if there is a ‘cigarette paper’ between what they charge – and in the liner market generally, we would expect immediate action by the EC against the P3 lines, including the imposition of appropriate sanctions for competition abuses.”

Mr Welsh also said shippers expected to share in any cost benefits the carriers would gain from the alliance.

“The P3 lines must now to step up to the plate and deliver on their promises of improved services and lower costs. Shippers will expect to see a wider range of services and enhanced performance, including improved service reliability and on-time delivery.

“Above all, shippers expect to share in the benefits of more competitive freight rates through reduced costs.”

The EC has the ability to investigate or suspend an alliance, and can fast-track legal proceedings and a ruling, he added.

Having already received the blessing of US regulators in March, the P3 negotiation bandwagon now focuses its attention on Asia, where the Chinese competition authorities are reported to be announcing their decision later this month.

Maersk Line chief trade and marketing officer Vincent Clerc said today: “We will now continue our close co-operation with competition and maritime authorities in, among others, China and South Korea to obtain their approvals.”

However, other jurisdictions, such as South Korea, could still delay the commencement of the P3 which has set a revised autumn target start date.

According to analyst Alphaliner, Maersk has opened up a “significant earnings gap” on its peers. It said that from an earnings scorecard for 17 main ocean carriers it surveyed in the first quarter of this year, the Danish carrier’s operating margin at 6.4% was well ahead of the negative -2.6% across 16 other major carriers.

Combined with CMA CGM, but not including MSC which does not report, Alphaliner said the operating profits of the P3 partners accounted for 96% of those made by the entire liner shipping industry. All their peers reported first-quarter 2014 losses, apart from Wan Hai and K Line, which recorded modest gains.