FMC withholds approval of Japanese ocean carrier merger
As if global ocean carriers did not have enough trouble managing rates and capacity, government agencies have called into question the viability of alliances and mergers designed to restore stability in the industry.
in the News
Swisslog wrote the book on AutoStore Gap Inc. takes steps to expand its e-fulfillment network Don’t call freight volume recovery a comeback FTR Shippers Conditions Index falls but remains in growth mode National diesel average falls, for week of March 27, reports EIA More NewsThe ocean carrier industry was handed another setback by a major regulatory agency this week as the proposed merger of three Japanese liner companies was rejected by the U.S. Federal Maritime Commission (FMC).
The unanimous decision to nix the Tripartite Agreement comprising Kawasaki Kisen Kaisha, Ltd. (K Line); Mitsui O.S.K. Lines Ltd. (MOL); and Nippon Yusen Kaisha (NYK) represents a fresh challenge to the “3-J” alliance for the time being. Furthermore, delays in Japanese antitrust approval means that the carrier’s contract deadline for next month will be missed.
“In order to receive the benefits of a merger, one needs to first merge,” says FMC commissioner, William P. Doyle
Much of what the Tripartite parties were asking for, adds Doyle, revolved around pre-merger or pre-consolidation coordination. For example, the parties were seeking authority to share information and conduct joint negotiations with third party businesses in the United States for as much as year in advance of any potential merger.
“These provisions would violate ‘gun jumping’ laws that forbid the sharing of competitively sensitive information or the premature combining of the parties,” adds Doyle.
Chris Rogers, an analyst with the consultancy Panjiva, is not particularly alarmed by FMC’s decision, which he describes as “technical in nature.” More of a worry, however, is the ongoing Department of Justice (DoJ) investigation of the container liner industry and what Rogers describes as “Congressional concerns” about alliances more broadly.
In an advisory letter written by DoJ assistant district attorney general, Renata Hesse, called upon the FMC to forbid the creation of the OCEAN Alliance, or to at least have the carriers rewrite the agreement to ensure competition.
“The DoJ has long taken the position that the general antitrust exemption for international ocean shipping carrier agreements is no longer justified,” she says.
For the time being, however, both the Ocean Alliance and THE Alliance still control 45 percent of the global business by sharing vessels and operating joint services.
About the Author
Patrick Burnson, Executive Editor Mr. Burnson is a widely-published writer and editor specializing in international trade, global logistics, and supply chain management. He is based in San Francisco, where he provides a Pacific Rim perspective on industry trends and forecasts. He may be reached at his downtown office: [email protected].Subscribe to Supply Chain Management Review Magazine!
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