Tuesday, March 18, 2014

P3 Alliance Container Freight Agreement Under the Spotlight

Shippers Forum Worries That Cooperation May Lead to Collusion
Shipping News Feature

US – EUROPE – WORLDWIDE – With just a few days left before the adjudicators from Europe and the US decide on the legality of the P3 shipping alliance between the world’s premier container shipping lines, there has been a final rallying cry from the Global Shippers’ Forum (GSF) urging the US Federal Maritime Commission (FMC) and the European Commission competition authorities to adopt appropriate measures to ensure that the grouping of Maersk Line, MSC and CMA CGM is unable restrict competition, reduce choice, or influence rates resulting from its potential dominating position with regard to intercontinental ocean freight trade.

Addressing the third GSF Annual Meeting in Los Angeles, FMC Commissioner William Doyle recognised shippers’ anxieties and said that the issues and questions raised by the GSF had been helpful for Commissioners and FMC staff in evaluating the P3. The results of the FMC’s investigations into the P3 are expected on 24 March, the end of the current 45 day review period, although some believe a statement might be forthcoming even sooner.

At the same GSF gathering, delegates endorsed a new legal submission to the European Commission Competition Directorate in Brussels which raises the potential for restrictions of competition arising from the unprecedented extent of commonality of costs resulting from the P3 including the ‘potential risk of collusion on rates and capacity due to the wide ranging scope of cooperation specified within the agreement’. The P3 ‘Network Cooperation Agreement’ could ‘fundamentally change the structure of container shipping markets serving the European Union’ according to the GSF.

Within its submission to the European Commission, the GSF has outlined its concerns over a range of EU competition law issues raised by the P3 Alliance. These concerns include the subsequent impact on other alliance agreements like the G6 Alliance and the Green Alliance, and the potential knock-on network effects resulting from the P3 Network Cooperation Agreement. GSF Secretary General, Chris Welsh said:

"The GSF has made a formal legal submission to the European Commission on behalf of shippers from all over the world. The major fear is the market impact that the P3 Agreement would have. If the P3 were to proceed in its current form the structure of container shipping markets serving EU and global trades would be fundamentally changed, including the possibility of eliminating effective competition. Shippers are rightly concerned that the carriers in the P3 will be able to eliminate effective competition in key European markets, including Europe/Far East and the transatlantic.”

The GSF had already raised questions with the European Commission in October 2013, regarding the proposed P3 Global Alliance and submitted a detailed request for the European Commission’s Competition Directorate General in Brussels to fully investigate the impact of the Agreement. The GSF requested essential features and details of the P3 Global Alliance so that it could complete its own legal analysis of the proposed agreement, whilst also filing a series of questions with the US Federal Maritime Commission in November 2013.