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FMC Study Finds Reduction In Container Alliances Could Cut Rates
Kinghood International Logistics Inc | Updated: Feb 06, 2017

   Federal Maritime Commissioner Rebecca Dye said research by the agency’s Office of Economics and Competition Analysis about the "impending reduction" from four to three major container shipping alliances should actually decrease rates on the transpacific trade, when considered in isolation from other factors.

   Giving members of the National Industrial Transportation League (NITL) a "sneak preview" of a study expected to be posted soon on the FMC website, she added, “That freight rate decrease may, however, be offset by upward rate pressure due to expected mergers.”

   In April, the four ocean carrier alliances cooperating on the major east-west trades - the 2M Alliance, the Ocean 3 Alliance, the G6 Alliance and the CKYHE Alliance (though Hanjin from the CKYHE is no longer operating) - are due to become three alliances.

   The three alliances will be:

     The 2M Alliance, consisting of Maersk Line and MSC;

     The Ocean Alliance, consisting of CMA CGM, COSCO, Evergreen Line and OOCL;

     And THE Alliance, consisting of Hapag-Lloyd, Yang Ming, MOL, NYK and “K” Line.

   Maersk Line and MSC reached a space-sharing deal with Hyundai Merchant Marine (HMM) that they said is "outside the scope" of the 2M Alliance, but it includes a combination of slot exchanges and slot purchases between the liner carriers.

   In addition to the mergers in the past year of CMA CGM and APL, and COSCO and China Shipping, Hapag-Lloyd is in the process of acquiring United Arab Shipping Company, Maersk is acquiring Hamburg Süd, and the Japanese carriers have announced plans to combine their container shipping units.

   During her remarks to the NITL's annual transportation summit in San Diego, Dye discussed what she said was the FMC’s “primary law enforcement responsibility: preserving competition through effective analysis and oversight” particularly in regard to alliances.

   "The Commission is neither pro-alliance nor anti-alliance. We are pro-competition," Dye said. "Our goal is to ensure that the dynamics of the marketplace determine economic outcomes. The rise of operational alliances is a market-driven phenomenon. The alternative to operational alliances is not the status quo. The dynamics of our liner shipping markets will continue to produce commercial and economic change.”

   She said the FMC “has been ‘tightening up’ on agreements filed with the commission and rejecting those that do not conform to our regulations. In this regard, the limited antitrust immunity Congress grants under the Shipping Act is available only where an agreement’s authorities are presented in clear and definite terms and embody the complete, present understanding of the parties. An agreement must set forth the specific authorities and conditions under which the parties will conduct their operations and regulate the relationships among the agreement members.”

   Dye noted that the FMC does not approve agreements, and that the only way it can stop one from entering into effect “is to successfully pursue an injunction in United States District Court based on legal theories.”


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