The right call
The U.S. Federal Maritime Commission made the right call in late March not to block the P3 Network, which Maersk Line, Mediterranean Shipping Co. and CMA CGM plan to start later this year.
The three largest container carriers will operate the mega 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 1984 Shipping Act, such agreements normally go into effect in 45 days, unless the FMC seeks additional information, which it did in this case.
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 did not violate the 1984 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., who cast the only dissenting vote among the five-member commission, is correct to note the P3 members used their “publicity machine” to brandish the benefits of the alliance. However, the lines understood well the confines of the 1984 Shipping Act when they presented the agreement to the FMC.
Even the FMC commissioners had to admit that the likelihood of the P3 substantially reducing competition and creating an environment of unreasonable rates for shippers is highly unlikely. The basic purpose of forming the P3 is for the three carriers to improve their operations, better absorb incoming big-ship capacity and weather the supply-and-demand imbalance which has plagued the main East-West trades in recent years.
The FMC also made it clear that its staff will remain in regular contact with the P3’s London-based network center to discuss operations, schedules, processes and business rules, and be watching out for any anti-competitive behavior.
The European Commission and Chinese government should take a similar approach when making their forthcoming decisions on the P3 Network and other large liner carrier alliances that may form in response.
It’s the best of both words — the P3 Network should be able to play itself out, while the FMC and its European and Chinese counterparts maintain the ability to protect shippers if abusive pricing and service behavior should occur.
This article was published in the May 2014 issue of American Shipper.
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