P3 fails to cross Chinese hurdle

Ministry rejects European shipping alliance plan on fair competition concerns

China's Ministry of Commerce on Tuesday rejected the container shipping alliance proposal floated by three European shipping giants to ensure fair competition in the Asia-Europe shipping market.

The ministry said its decision comes after a thorough review of the proposal under China's merger control rules.

Denmark-based A.P. Moller-Maersk Group, Mediterranean Shipping Co SA of Switzerland and French firm CMA CGM SA had in June 2013 decided to establish a long-term operational alliance - the P3 Network on East-West routes - to optimize resources and lower the cost of container shipping.

The alliance said it would be able to handle a total capacity of 2.6 million 20-foot equivalent units, initially using 255 large-capacity vessels on 29 loops on three trade lanes: Asia-Europe, trans-Pacific and trans-Atlantic.

The Ministry of Commerce said it had no objection to companies increasing their competitiveness to gain market dominance.

However, companies that have a certain market power, status and resources need to be carefully analyzed and reviewed, especially their size and influence on market competition, the ministry said.

After a number of assessment on the P3 network's fleet size, market control ability, industry characteristics and other factors, the ministry believes that the network will form a powerful alliance and control up to 47 percent of the container business on the Asia-Europe service route. Therefore, its market control rate will go up significantly.

"The P3 partners respect the ministry's decision. They have agreed to stop the preparatory work on the P3 Network," said a statement by A.P. Moller-Maersk Group.

"The decision does come as a surprise to us, of course, as the partners have worked hard to address all the regulators' concerns," said Nils Andersen, Group CEO of A.P. Moller-Maersk Group.

The US Federal Maritime Commission in March decided to allow the P3 Network to function in the US. Earlier this month, the European Commission had told the P3 partners that it had decided not to open an antitrust investigation into P3. The alliance was set to start global operations later this year.