The Chinese Ministry of Commerce's (MOFCOM) decision yesterday to reject the massive P3 network alliance between the three largest container carriers in the world sent shock-waves through big parts of the shipping industri.
To the outside world the parties - not least the Maersk executive team - reacted stunned at the news of the final decision, but according to the MOFCOM's decision, published in Chinese at the ministry's website, the Chinese had reservations from the start and postponed the decision several times since early 2014. And the P3 carriers had to make several changes in order to accommodate the Chinese.
MOFCOM was concerned that the collaboration between Maersk Line, CMA CGM and MSC could distort the competition:
"The parties have several times discussed how to reduce the effect on competition. The parties (the three carriers) have through several rounds suggested improvements and solutions. After evaluating the matter MOFCOM has found no evidence that the proposed improvements and solutions will comply with the law," says the ministry.
Maersk Group CEO Nils Smedegaard Andersen stated as recently as May that the alliance was expected to be launched this fall.
Investors also reacted drastically to the Chinese decision yesterday. The share decreased by eight percent and there are now speculations about how Maersk Line plans to achieve the 5-6 percent in cost savings that the alliance was estimated to bring the carrier.
Maersk Line estimated that the savings on the routes covered by the alliance would be around 14 percent.
A particularly crucial element in the decision was the fact that the involved carriers already hold a very strong position on the global market.
"The Commerce Department has no objection to the competitiveness of enterprises through their own gain market dominance, but when operators who already have a certain market share want to work together to further dominate the market, you need to carefully analyze their competition," says the ministry.
The Chinese statement provides a more detailed outline of the negotiating process.
The ministry states that it had reservations about the P3 construction from the outset when it received the carriers' application on September 18th last year. In the period that followed, the ministry deemed the application incomplete, but when the three carriers involved submitted further information in mid-December, concerns about the legality of the collaboration were strengthened and the Chinese began to evaluate the matter.
This was followed by a process in which the Chinese postponed the decision date several times. First the ministry opted to scrutinize the competition laws more closely on January 18, before postponing the date once more on April 18.
Read the entire Chinese decision below, translated through Google Translate:
Commerce Department antitrust bureau interpretation shipping company Maersk and other three centers established network operators focused review of case
June 17, the Ministry of Commerce announced on Maersk, MSC, CMA CGM three shipping companies to set up network-centric business concentration antitrust review of the case to make a decision to ban. The case involved a large-scale cooperation of the three largest shipping companies carried out, will have a profound impact on the global shipping industry, causing a high degree of attention. Commerce Department antitrust bureau proceeding interpretation.
The official pointed out that the Commerce Department has no objection to the competitiveness of enterprises through their own gain market dominance, but already have a certain market forces companies to focus further enhanced by market forces operators to gain market dominance behavior, you need to carefully analyze their competition. Ministry of Commerce of the case related to market share, market power, market entry, industry characteristics and other factors were assessed that after the completion of this focus, the transaction parties will form a close-associates in Asia - Europe service combined capacity share of the container liner shipping routes up to about 47%, the market concentration is also greatly improved.
The official said that in the period under review, the Commerce Department reported side pointed to this concentration of business operators may have excluded the effect of restricting competition, and on how to reduce the adverse effects of this concentration of undertakings on competition conducted several talks. Declaration submitted by several rounds of relief programs. After evaluation, the Ministry of Commerce believes that relief programs submitted by reporting the lack of appropriate legal basis and convincing evidence to support, not prove beneficial effects of the concentration on competition is greater than or adversely affect compliance with the public interest. Thus, according to "People's Republic of China Anti-Monopoly Law", the Ministry of Commerce decided to ban this concentration of business operators.
The official stressed, the Commerce Department will continue to monitor the concentration of business operators shipping market behavior, in cooperation with relevant government departments, safeguard the order of market competition, protect consumer interests.
September 18, 2013, the Department received Maersk, MSC, CMA CGM establish network-centric business concentration antitrust declaration. Audited, the Commerce Department considers the case filings are incomplete, requiring the reporting party to be added. December 19, 2013, the Ministry of Commerce confirmed by supplemental filings, found "anti-monopoly law," the requirements of Article 23, to be filed against the operators of centralized reporting and begin preliminary examination. January 18, 2014, the Ministry of Commerce decided to focus on further examination of this operator. April 18, 2014, the Ministry of Commerce decided to extend the deadline further review deadline is June 17, 2014.