The scope of the Global Regulatory Summit has expanded since it was announced by the FMC in October. The orginal focus was solely on the P3 Network, a vessel-sharing agreement unprecedented in size proposed in June by the top three global container lines, Maersk Line, Mediterranean Shipping Co. and CMA CGM to cover the east-west trades. The focus now is on “carrier alliances, vessel sharing agreements (and the) impact of operational agreements on international trade,” the FMC said.
Since the summit was announced, the G6 Alliance, comprising APL, Hapag-Lloyd, Hyundai Merchant Marine, MOL, NYK Line and OOCL, has announced plans to expand into the trans-Atlantic and Asia-U.S. West Coast trade lanes.
“There has been an evolution of the alliance model in the liner industry,” FMC Chairman Mario Cordero told the JOC. “Today, 13 of the top 20 carriers are associated in some form of an alliance. The question is how the evolution will impact international maritime transportation.”
The proposed P3 Network spurred the FMC to host the summit, he said. But discussions at the summit will now address broader issues of how regulators will address the use of carrier alliances and vessel-sharing agreements, and how these operational agreements could affect the industry.
The FMC said discussions with regulators from Europe and China won’t have an impact on its decision on whether to ask a federal judge to block either or both the P3 plan and G6 expansion. Commissioner Michael Khouri told the JOC in November that the FMC scrutinizes such VSAs on whether they violate competition issues in the Shipping Act of 1984. In essence, the agency will judge how likely it is the proposals would bring “unreasonable increases in transportation costs” and “unreasonable decreases in services,” he said.
Cordero said he would share with European and Chinese regulators how the FMC reviews alliances and vessel-sharing agreements, and expects his counterparts to do similarily. Following a morning meeting, the other four commissioners will meet separately with European and Chinese regulators.
Under the Sunshine Act, legislation that aims to increase transparency in government, the discussions would have to be made public if two or more FMC commissioners were present. Cordero said the summit was the “first of its kind” for the agency and it wants to be careful not to violate the Sunshine Act. The public is invited to hear the closing remarks of the summit at 4 p.m. at the FMC Main Hearing Room.
EU regulators are expected to be the hardest for P3 carriers to convince that the plan won’t run afoul of competition laws. The EU’s top transport official, Siim Kallas, has spoken out in favor of the P3, but he doesn’t have a say in whether the bloc’s competition authorities — which are separately investigating container lines for antitrust violations — reject the plan. China doesn’t have automatic legal grounds to reject the alliance because it already has allowed many VSAs, such as the G6 and CKYH, sources at the World Shipping (China) Summit in Ningbo told the JOC last month.
The proposed P3 alliance will enable Maersk, MSC and CMA CGM to reduce operating costs in the Asia-Europe, trans-Pacific and trans-Atlantic trades by consolidating their services around fewer but larger ships that will result in lower per container costs and thus put the carriers at an advantage over lines operating smaller ships. The alliance would represent approximately 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 FMC said last week it will ask P3 carriers more questions on the plan, stopping the clock on the review. Without such a pause, the FMC would have until the middle of this month to decide whether to allow the P3 to go through or ask a federal judge to block it. Once the carriers respond to the FMC questions, a new 45-day regulatory period will begin. The carriers can take as long as they want to respond to the FMC’s questions.
The majority of public comments from the FMC’s first solicitation regarding the P3 were positive. The FMC’s request for additional information from the P3 carriers isn’t available to the public.
