Shippers raise concerns over industry alliance

by Carolyn Gruske

In June, three of the world’s biggest ocean carriers companies announced a co-operative, vessel-sharing alliance. Now, a shippers’ organization is raising concerns about what the alliance will mean for competition.

The P3 Alliance is Maersk Line, MSC Mediterranean Shipping Company SA and CMA CGM of France. They say P3 will be an independently operated network with 255 vessels on 29 loops.

Maersk Line will contribute roughly 42 percent of the capacity (including the new Triple-E ships), or about 1.1 million TEUs. MSC will account for approximately 34 percent of the capacity—approximately 0.9 million TEUs, and CMA CGM will provide approximately 24 percent of the capacity or 0.6 million TEUs. Their loops will include the trans-Pacific route, the North Atlantic, and Asia-Europe.

According to Chris Welsh, secretary general of the Global Shippers Forum, the alliance “is certainly a game-changer in terms of the container shipping industry”.

He said the combined global market share of the three companies is between 32 and 37 percent.

“The market shares are far in excess of any other vessel-sharing agreement or consortium. In the trans-Atlantic it’s well over 40 percent. It’s well over 40 percent in Europe-Asia trade, and well over 30 percent in the trans-Pacific.”

He explained when it comes to liner shipping, competition authorities and regulators have traditionally deemed that agreements accounting for 30 percent market share or less are “unlikely to cause competition problems, and will generally provide users with their fair share of benefits in terms of improved services, reduced costs, and so on.

“When it goes above 30 percent, when it gets into that 40 percent territory, issues of market dominance become more apparent. And the potential benefits that may be passed on to customers equally become a bit opaque.”

Welsh added that under European competition laws, agreements over 40 percent are likely to be classified as being restrictive to competition.

He also said that it is up to the organizations forming the alliance to conduct their own self-assessment to determine if their action will hurt competition. Outside of the initial announcement about the formation of the alliance, Welsh said details about P3 aren’t readily available.

“We know nothing about the agreement—we have no idea what this agreement is,” he said, so the organization has written to the competition authorities, asking them if they have opened a formal investigation of the alliance.

“We’ve tabled a series of questions we are asking the commission to answer for us and also to give us an outline of the essential terms of the agreement, so we can conduct our own internal competition law assessment of the agreement.”

The London, UK-based Global Shippers Forum, comprises member organizations from around the world, including the National Industrial Transportation League in the US and the Canadian Industrial Transportation Association.