By Mike Wackett
The proposed vessel sharing agreement between the world’s three largest container lines has been given the seal of approval by the U.S. regulatory office of the Federal Maritime Commission (FMC), despite the opposition of its former chairman, industry veteran Richard Lidinsky, who voted against the P3 vessel sharing agreement (VSA) after having halted the FMC review in December with a request for more information.
The decision by the FMC is not a surprise, given the positive comments on the benefits of alliances from current chairman Mario Cordero, as well as the fact that the regulator has not previously refused permission for a VSA. However, the sheer size of the operational marriage between Maersk Line, MSC and CMA CGM –20 per cent larger than the G6 alliance – has caused much angst over the potential elimination of effective competition.
Approval for the P3 looked set after the first 45-day review by the FMC, until ex-Sea Containers executive Commissioner Lidinsky effectively stopped the clock with his information request. In a December release from the FMC, Mr Lidinsky noted: “This agreement appeared to be moving into an implementation phase without regard to adequate regulatory approval.” He had said that it was critical shippers and interested parties had their concerns addressed, adding “we need to understand the implications of what has been proposed”.
Many shippers and lobbying bodies had raised concerns about the impact on price and service levels of the VSA proposal, and it was the most talked about topic at the annual TPM conference in Long Beach this month.
Shippers were understandably wary of the dominance the P3 network would have, and the opportunity for price collusion was a constant fear voiced, although in general there was a “trust in the system” view that this would not be allowed to happen. Moreover, in terms of service integrity, one shipper commented that the market-leading schedule reliability of Maersk Line would “pull up the others” in a much-needed improvement to a worsening on-time liner performance. Nevertheless, the P3 partners were heavily criticised on the “dearth of communication” and “nonexistent consultation” with shippers about their scheduling plans.
However, despite Mr Lidinsky’s reservations, the P3 proposal has cleared the US leg of its regulatory journey – albeit that the approval comes with caveats to address the concerns of shippers, which are referred to by the FMC as being: “an unreasonable increase in transportation costs” or “an unreasonable reduction in transportation service”.
To counter this twin threat, the FMC said it would instruct its staff to issue “alternative reporting requirements” to the P3 parties to assist with the commission’s “ongoing, close monitoring of the agreement”.
Mr Cordero said the FMC expected the agreement to “produce operational efficiencies for the benefit of the US consumer”, and added that the reporting requirements would “ensure we have timely and relevant information to act quickly should it be necessary”. Maersk Line spokesman Michael Storgaard told The Loadstar: “North America and the U.S. in particular is a key shipping market. Therefore, the decision by the FMC is a very important step towards overall approval of P3, which is still subject to regulatory review in jurisdictions in Europe and Asia. “We will now continue our close co-operation with competition and maritime authorities in order to address questions and to explain the nature and benefits of P3,” he said.
Elsewhere, the conditional agreement seems to have placated the Global Shippers’ Forum which had urged the regulators “to adopt appropriate measures to ensure that the P3 alliance is unable to restrict competition, reduce choice or influence rates”. GSF Secretary General Chris Welsh told The Loadstar this morning that it was “good news for shippers, as the FMC has acted on our concerns”.
P3 members still await a response from the Chinese Ministry of Commerce for their network proposal, which is anticipated by May 10. But this is not expected to present too many problems, enabling the P3 to commence operations, as scheduled, in the second half of this year.
Mr Storgaard said the partners had earmarked the middle of this year for the P3 to formally go live, although, “due to the on-going approval process, we are not able to elaborate on the Network Centre set-up in regards to location, staffing, etc”. Meanwhile, the FMC’s 45-day review period for the G6 Alliance’s proposal for an extension of its co-operation on east-west trade lanes expires on April 4 – it should in theory be a formality, following the P3 approval.
Re-printed courtesy of The Loadstar (www.loadstar.com)