FMC demands more detail from P3 before alliance can operate in the US

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The US Federal Maritime Commission’s decision to ask for more information from the parties proposing the P3 vessel-sharing agreement is not unexpected, given that several industry big hitters have raised concerns about the impact of the mega-alliance on container trades.

Moreover, the effect of the FMC’s vote on December 5 to seek more clarification from Maersk Line, MSC and CMA CGM – triggering a further 45-day consultation period after the requested information is received – is to delay the earliest start date of the alliance in the US. This seems to have given comfort to the lobby that wants to ensure the P3 proposal is carefully scrutinised.

The FMC announcement that its commissioners had voted in favour of closer scrutiny was welcomed by Global Shippers’ Forum secretary general Chris Welsh (pictured), who said: “When shippers still lack basic information from the P3 about sailing schedules and how services will affect production and distribution, it is absolutely necessary for extra evaluation time for carriers to respond to questions submitted by the GSF regarding the competitive impact of the P3.”

Nevertheless, the majority of the public comments received by the FMC on the proposed P3 alliance have not been fundamentally opposed to the operational merger; shippers and forwarders apparently seeing the bigger picture of scale advantages.

For example, the prospect of bigger ships and more direct calls as a consequence of the operational marriage of the world’s three largest container lines was highlighted as a plus by some respondents.

It was a point picked up by a sea freight manager at a major US NVOCC who said: “We believe the P3 will be beneficial to our company and our clients because of the vessel capacity increase and additional direct calls.”

However, many responses to the FMC’s request for comment, not least the GSF’s, urged careful scrutiny of the P3 document. The forum’s questions focused on the FMC requirement to demonstrate whether the P3 was “likely by a reduction in competition to produce an unreasonable reduction in transportation cost in accordance with the provisions of the 1984 US Shipping Act as amended by the Ocean Shipping Reform Act of 1998”.

Mr Welsh said: “It is clear that the P3 goes beyond a normal vessel-sharing agreement, in terms of its scale and scope and operational arrangements. The game-changing nature of the P3 is underlined by the response by the G6 alliance and others. We are, potentially, looking at a fundamental change in the structure of the global liner market and the wider competitive environment for shippers.”

The stalling of P3 regulatory approval in the US comes ahead of an FMC-hosted Washington DC summit on December 17 that will also be attended by officials from the EU and China.

Notwithstanding objections to the merger, there is also a view that the P3 partners may have been too presumptuous in the announcement of a London-based Network Centre for the co-ordination and management of the alliance. And the appointment of a CEO, Maersk Line’s Lars Mikael Jensen, prior to obtaining regulatory approval, may also antagonise the officials.

However, according to the agreement filed with the FMC, the network centre will have a management committee of one representative from each carrier, which will approve a pro-forma schedule and amendments, the long-term reallocation of vessels between services and any adjustment to P3 capacity.