FMC Approves P3 But With Tighter Monitoring Conditions

Mark Szakonyi, March 20, 2014, Journal of Commerce

The U.S. Federal Maritime Commission today voted 4-to-1 to allow the P3 Network to set sail in the second quarter and vowed to create new reporting requirements to monitor the vessel-sharing agreement involving the three largest global container lines.


Commissioner Richard Lidinsky gave the sole dissenting vote against the VSA sought by Maersk Line, Mediterranean Shipping Co. and CMG CGM. The FMC said the VSA on the Asia-Europe, trans-Pacific and trans-Atlantic trade lanes is not likely to produce an unreasonable increase in transportation cost, nor will it likely cause an unreasonable decrease in service. Both measures set forth by the Shipping Act of 1984 are how commissioners determine whether to allow a VSA or seek an injunction against one via federal court.


“I do want to offer a word of caution: The P3 Parties should be mindful of the antitrust probes that are being conducted in the oceanborne transportation sector – worldwide,” Commissioner William Doyle said in a statement.


The FMC said there may be future circumstances in which the P3 carriers would unreasonably raise prices and decrease service via the VSA. With this in mind, the commission has directed agency staff to create “new reporting requirements specifically tailored to this agreement’s unique authority” so that the FMC can “act quickly should it be necessary,” FMC Chairman Mario Cordero said in a statement.


Under the monitoring program, the P3 carriers are required to engage in regular communication with the agency on operations, schedules, processes and business rules. The P3 carriers will also have to give advance notification of cancelled sailings or any service modifications that could affect average weekly capacity.


The FMC will also monitor rates “in connection with actions altering capacity” and actions with third parties that might threaten competition. The P3 carriers will also have to submit certain information separately to ensure “independence of individual lines and autonomy of the Network Center.”


Doyle said the P3 carriers have reconsidered how they would handle negotiations with third parties, such as marine terminal operators, stevedores and supply providers. Under the revised VSA, the carriers must negotiate independently with third parties and enter separate contracts with such parties, he said.


Lidinsky’s opposition to the P3 doesn’t come as surprise. He said last year that the alliance was “moving forward as if it has already met regulatory approval despite the lack of any significant filing with regulatory authorities in Europe, China or the U.S.”


Some shippers and transportation providers raised concerns with the FMC that the P3 would foster monopolistic practices, reduce service via increased use of transshipment hubs and push out smaller carriers. The P3 carriers have countered that the alliance will be strictly operational by nature and improve reliability by reducing the number of sailing cancellations.


The alliance would represent roughly 42 percent of Asia-Europe capacity, 24 percent of trans-Pacific capacity and 40 to 42 percent on the trans-Atlantic, according to the FMC. The P3 would allow the carriers to consolidate their services around fewer but larger ships, resulting in lower per-container costs and giving the trio a cost advantage over carriers and alliances that operate smaller vessels on average.


As it relates to the European Union, the P3 doesn’t require regulatory approval, but regulators have been reviewing information collected from the carriers and those in the industry to see if there are grounds for an investigation that it could initiate.


Since the P3 isn’t considered a merger, it can take effect in Europe immediately. But if European regulators at any time determine that it violates Article 101 of the Treaty on the Functioning of the EU, authorities can dissolve the consortium, Hubert de Broca, directorate general for competition at the EU’s division of Antitrust-Transport, Post and Other Service, told the JOC late last year.


Chinese regulators’ view of the P3 remains unclear. The country’s murky regulatory procedures and willingness to protect state-owned industries, such as container lines Cosco and China Shipping, make gauging the inner workings of Beijing difficult at best. However, some believe recent moves by Cosco and China Shipping to expand cooperation reflect pressure by the central government in Beijing on those carriers to become stronger competitors.


Contact Form Powered By :