China explains P3 rejection

Liner Shipping and Trade, Markets, Trade and Commerce — By on June 20, 2014 at 9:03 PM
APM have announced that competition authorities in China have rejected the planned P3 Network alliance in East-West container trades. Photo: PA

APM have announced that competition authorities in China have rejected the planned P3 Network alliance in East-West container trades. Photo: PA

China’s Ministry of Commerce has confirmed its rejection of the P3 application. The P3 was to be an operational alliance made of three leading global container shipping companies, Maersk Line, MSC and CMA-CGM. (source: IHS Fairplay)

The ministry stated that, with investigations and reviews, it believes that the network formed by this alliance will limit or exclude competition in the Asia-Europe container shipping market.

As a result, the ministry made the decision to turn down the application of P3 in accordance with China’s Anti-Monopoly Law.

As of 1 January, 2014, Maersk Line, MSC and CMA-CGM share 20.6%, 15.2% and 10.9% respectively in the Asia-Europe services, in terms of capacity, and any of the three is bigger than its competitors.

The Herfindahl-Hirschman Index (HHI), a commonly accepted measure of market concentration, in the Asia-Euro container shipping market, will climb from 890 to 2240 once P3 launched, stated the ministry.

“The decision does come as a surprise to us, ” said Group CEO Nils S Andersen.

He added that the P3 alliance would have allowed Maersk Line to make further reductions in cost and CO2 emissions, as well as improving its services to its customers with a more efficient vessel network.

P3 was scheduled to start operations in the autumn of 2014, subject to approvals by various authorities including the European Union, United States and China. On 24 March 2014, the US Federal Maritime Commission (FMC) decided to allow the P3 Network agreement, and on 3 June 2014, the European Commission decided not to open an antitrust investigation into P3 and had closed its file.

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