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FMC approves P3 despite shipper objections

WASHINGTON, D.C.: The U.S. Federal Maritime Commission (FMC) has approved the proposed P3 capacity sharing agreement between A. P. Moller-Maersk, CMA CGM and MSC Mediterranean Shipping Company.

Following a review, the FMC said the P3 can "share vessels and engage in related cooperative operating activities in the trades between the U.S. and Asia, North Europe, and the Mediterranean effective March 24, 2014."

The FMC has authorized the initial use of 130 vessels with capacities ranging from 4,000 to 12,250 TEUs with the option to operate up to 180 ships each with a capacity of up to 19,200 TEUs. The P3 members are also permitted to add and withdraw capacity based on the introduction of new vessels - but only Maersk Line's U.S.-flag ships operated within the P3 network will be allowed to carry cargo normally reserved for such vessels.

In its ruling, the commission determined the agreement "is not likely at this time, bcma-cgm-jules-verne-marseille-I3y a reduction in competition, to produce an unreasonable increase in transportation cost or an unreasonable reduction in transportation service under section 6(g) of the Shipping Act." Noting that the companies might "unreasonably reduce services or unreasonably raise rates" the FMC will require the P3 to provide reports as part of "close" monitoring process.

FMC chairman Mario Cordero commented: "The commission's action on the P3 agreement takes into account the comprehensive, competitive analysis conducted by the FMC staff and comments received from shippers and other stakeholders. While the agreement is expected to produce operational efficiencies for the benefit of the U.S. consumer, the new reporting requirements specifically tailored to this agreement's unique authority will ensure we have timely and relevant information to act quickly should it be necessary."

His view was not shared by Richard Lidinsky, one of the five FMC commissioners, who in January "stopped the clock" by calling for more information on a submission by the G6 Alliance - made up of American President Lines, Hapag Lloyd, Hyundai Merchant Marine Company, Mitsui O.S.K. Lines, NYK and OOCL. The G6 wants to operate 180-220 ships with a maximum capacity of 14,000 TEUs between Europe, the Mediterranean and the U.S. Gulf and East Coasts.

The P3 decision follows submissions by the Global Shippers' Forum (GSF) to the FMC and European Commission worried the alliance might restrict competition or collude on rates. Chris Welsh, secretary-general of the GSF commented: "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."

Speaking to GSF members prior to the ruling, FMC commissioner William Doyle acknowledged their concerns and said they had been helpful for the FMC in evaluating the P3 filing.

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