The U.S. Federal Maritime Commission said Thursday that its members voted not to block the P3 Network that Maersk, Mediterranean Shipping Co. and CMA CGM plan to start later this year.
The three largest container carriers expect to begin operating a vessel-sharing agreement in the transpacific, transatlantic and Asia-Europe trades.
They first announced their intentions in June and filed a formal agreement with the FMC in October. Under the Shipping Act of 1984, such agreements normally go into effect in 45 days, unless the FMC seeks additional information, which it did in this case.
The agreement can now go into effect Monday, but the plan is still facing scrutiny by European and Chinese regulators.
The FMC said it conducted an extensive review of the proposed P3 trades between the United States and Asia, North Europe and the Mediterranean, and determined the alliance “is not likely at this time, by a reduction in competition, to produce an unreasonable increase in transportation costs or an unreasonable reduction in transportation service under section 6(g) of the Shipping Act.”
If it had determined the opposite, the FMC could have sought to block the agreement by seeking an injunction or requesting it to be modified.
Commissioner Richard Lidinsky Jr. cast the only dissenting vote among the five-member commission, saying that he wanted to seek a 6(g) injunction.
He said in a statement that “this agreement is in reality not an alliance or true vessel-sharing arrangement. Rather, it is in effect, a merger of the top three global liner companies. This agreement will allow the controlling carrier the ability, when coupled with existing discussion agreements, to deploy its assets along with those of the other two carriers to dominate vessel competition and narrow shipper options at U.S. ports.”
“Other than the publicity machine of the three would-be partners to rally support, there is nothing in the record before us of Americans clamoring for this proposal,” he added. He said the FMC staff should have given more weight to comments by American parties involved in international waterborne trade.
Lidinsky’s statement appeared to highlight one of the aspects of the alliance that has provoked a great deal of comment -- the creation of a P3 Network Center in London to direct the operations of the P3. Lars Mikael Jensen, a 30-year Maersk executive, is chief executive officer of the center.
The FMC noted “there may be circumstances that could permit the P3 Agreement parties at some point in the future, to unreasonably reduce services or unreasonably raise rates that could raise concerns under section 6(g). To address these concerns, the commission directed staff to issue alternative reporting requirements to the P3 Agreement parties to assist the commission in its ongoing, close monitoring of the agreement."
"The commission’s action on the P3 Agreement takes into account the comprehensive, competitive analysis conducted by the FMC staff and comments received from shippers and other stakeholders. While the agreement is expected to produce operational efficiencies for the benefit of the U.S. consumer, the new reporting requirements specifically tailored to this agreement’s unique authority will ensure we have timely and relevant information to act quickly should it be necessary," said FMC Chairman Mario Cordero in a statement.
In a separate press release, Commissioner William Doyle said after reviewing comments submitted by the public about the P3 and submitting his own questions to the P3 parties, he decided not to delay the agreement from going forward.
“I am particularly pleased that the P3 parties have reconsidered how they would handle negotiations with third parties, suppliers, small businesses and other service providers. I also appreciate Maersk’s long-standing commitment and support to the United States with respect to jobs, management of U.S. government-owned ships and the commercial ships it has registered under the U.S. flag. In addition, the P3 Network Alliance claims it will deliver significant environmental benefits through substantially lower fuel consumption, thereby significantly reducing CO2 emissions,” Doyle said.
He added caution by saying, "The P3 parties should be mindful of the antitrust probes that are being conducted in the oceanborne transportation sector -- worldwide. To this end, the Federal Maritime Commission is not taking its hands off the wheel and is hereby instituting a monitoring program for the P3 Network Alliance.”
Lidinsky noted that an attempt by the FMC to block the P3 vessel-sharing agreement would have been unusual, saying that “the agency has in essence permitted over 1,600 carrier agreements in the last 30 years -- never stopping one -- and sees nothing potentially harmful with the top three companies in an unprecedented combination.”
He added that “perhaps the time is at hand for a thorough executive and congressional review of the 1984 Act to see how U.S. interests are being served by its current procedures.”
Lidinsky also said, “from observing our industry over 40 years from a variety of perspectives, I feel if we allow this agreement to take effect, it will become a model precedent. The United States, the European Union, the People's Republic of China or any other regulatory authority will be hampered in protecting their national maritime interests in direct or cross trades.”
“After nearly a decade of turbulence in the liner market the last thing needed is this device designed solely to fill the largest ships of the controlling carrier at the expense, as one commentator has expressed it, of the world's maritime architecture. The filing parties have every right to apply for this unique status under our anti-trust laws, however there is nothing in the statutes or regulations we administer requiring we grant the parties request to solve self-inflicted operational and commercial problems.”
Timothy Simpson, a Maersk Line spokesman, said his company was pleased with the decision and believed “the P3 Network will ensure that Maersk Line and its partners in P3 (CMA CGM and MSC) can continue to serve the North American markets with competitive and reliable container shipping services. P3 will further enable the three shipping lines to develop in line with customer requirements.
"North America and the U.S. in particular is a key shipping market," he added. "Therefore, the decision by the FMC is a very important step toward overall approval of P3, which is still subject to regulatory review in jurisdictions in Europe and Asia."