FMC votes on 2M vessel-sharing agreement

Maersk and MSC plan to start up global partnership on East-West trades in January.    The Federal Maritime Commission said it will let the proposed 2M vessel-sharing agreement between the world’s two largest container shipping lines — Maersk and MSC — move forward.
   The agency voted 4-1, with Commissioner Richard J. Lidinsky dissenting, to not block the agreement from going into effect.
   Maersk said it now expects the alliance to begin operations in January 2015.
   The FMC said it made its decision after concluding the 2M VSA “is not likely at this time, by 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.”
   The FMC said it did impose reporting requirements on Maersk and MSC to assist in “ongoing, close monitoring of the agreement.”
   FMC Chairman Mario Cordero said, “The commission’s action on the 2M agreement is based on the comprehensive, competitive analysis conducted by the FMC staff, and takes into account responses from the agreement parties to staff and commissioner questions raised during the 45-day review period, as well as comments received from the European Shippers Council, the only public comment received on the proposed agreement. I am confident that the reporting requirements will ensure that the commission will have timely and relevant information to monitor activity under the agreement, and will enable the FMC to act quickly should it be necessary.”
   Maersk and MSC announced July 10 their plan to enter into a long-term, 10-year VSA on the Asia-Europe, transatlantic and transpacific trades, and the parties filed their agreement with the FMC on August 27.
   Because they involve routes reaching the U.S., the parts of VSA having to do with the transatlantic and transpacific trades were subject to the approval of the FMC. Maersk said the U.S. was the “only remaining jurisdiction where the parties had to obtain formal approval.”
   It said it had filed the 2M agreement with “maritime authorities in a number of other jurisdictions. The parties will continue their close cooperation with these authorities.”
   In the U.S., VSAs go into effect automatically 45 days after being filed with the agency unless the FMC seeks goes to court and seeks an injunction, something it has never done. The FMC could have “stopped the clock” and asked for additional information, which would have created another 45-day waiting period. So the agreement now goes into effect Oct. 11, though the two liner companies indicated they will not actually start up the 2M until 2015.
   Commissioner William P. Doyle said a review by the FMC’s Bureau of Trade and Analysis found while Maersk and MSC “will be collaborating operationally, these carriers will continue to compete with each other on pricing and cost. That is, shippers will continue to negotiate with each carrier individually. With regard to transportation service, each party will increase its ability to provide service offerings and overall capacity.”
   Doyle said he was particularly pleased that the 2M parties adopted the language from the previously proposed P3 network agreement related to negotiations with third parties, suppliers, small businesses and other service providers.
   The P3 agreement, proposed last year by Maersk, MSC and CMA CGM, would have been a similar global alliance, but would have set up a central operations center in London, as well as including the tonnage of CMA CGM, the world’s third-largest container carrier. That raised the hackles of some regulators, and China’s Ministry of Commerce rejected the P3 earlier this year, leading Maersk and MSC to propose the smaller, looser 2M.
   Maersk said the 2M agreement is subject only to self reporting in Europe and will be registered wit the Ministry of Transport in China, saying it is similar to other VSAs.
   Doyle indicated that the two carriers were responsive, answering all of his questions over the past 45 days and sending executives from Europe to the FMC to meet with commissioners.
   “They followed up the meeting with written responses to my questions regarding their proposed vessel sharing agreement. In addition, I had several follow-up conversations with the principals,” he said.
   Doyle said he also appreciated “Maersk’s long-standing commitment and support to the United States with respect to jobs, management of U.S.-government owned ships, and the commercial ships it has registered under the U.S.-Flag.”
   He said Maersk and MSC said the agreement will lead to approximately a 10-percent reduction in fuel consumption and air pollution.
   In a statement, FMC Commissioner Richard A. Lidinksy, Jr., said that when he was chairman of the FMC, “I always supported requests for additional information from other commissioners. In the proposed 2M agreement, there remain many unanswered questions that could have been answered in the additional 45-day period. Regrettably, my position has not been supported, and the agreement will be allowed to take effect on Saturday with many issues unresolved.”