EU grants conditional approval of Maersk-Hamburg Süd deal

The European Commission has cleared the proposed acquisition of German ocean carrier Hamburg Süd by industry leader Maersk Line, provided the company withdraws from five trade-route specific vessel sharing agreements.    The European Commission has granted approval of A.P. Møller–Mærsk Group’s proposed purchase of German ocean carrier Hamburg Süd, subject to certain conditions, the European Union competition watchdog said in a statement.
   The European Commission has cleared the proposed acquisition of German ocean carrier Hamburg Süd by the Danish shipping conglomerate, provided the company withdraws from five trade-route specific vessel sharing agreements.
   According to the EC, the combined firm “would have faced insufficient competition after the transaction,” on trade routes between North Europe and Central America/Caribbean, North Europe and West Coast South America, North Europe and the Middle East, the Mediterranean and West Coast South America, and the Mediterranean and East Coast South America.
   As a result, the commission’s approval of the deal is subject to the German carrier’s withdrawal from the Eurosal 1/SAWC, Eurosal 2/SAWC, EPIC 2, CCWM/MEDANDES and MESA consortia.
   “In particular, these links could have enabled the merged entity to influence key parameters of competition, such as capacity, for a very large proportion of those markets, to the detriment of their commercial customers and, ultimately, of consumers,” the EC said.
   The merger would also create what the EC called “limited links” between Maersk Line and Hamburg Süd in the short-sea shipping and tramp markets, as well as between the two companies’ activities in container liner shipping and the container terminals, harbor towage, freight forwarding, container manufacturing and inland transportation sectors, where Maersk Line and other Maersk Group subsidiaries do business.
   However, the commission found no competition concerns in either area, primarily because there are several other active service providers in both markets.
   In order to address the EC’s competition concerns, Maersk has offered to terminate Hamburg Süd’s participation in the five abovementioned agreements, which “will entirely remove the problematic links between Maersk Line and HSDG’s consortia that would have been created by the transaction,” the EC said.
   In the meantime, Hamburg Süd will “continue to operate as part of the five consortia during the notice period to guarantee an orderly exit,” the commission said. “However, a monitoring trustee will ensure that no anti-competitive information is shared between these five consortia and the merged entity during that notice period.
   “In view of the proposed remedies, the Commission concluded that the proposed transaction, as modified, would no longer raise competition concerns,” it added. “The decision is conditional upon full compliance with the commitments.”
   The parent company of container shipping industry leader Maersk Line first announced plans to acquire north-south specialist Hamburg Süd from the German conglomerate Oetker Group for an undisclosed price back in December 2016.
   According to Maersk, the deal for the the world’s seventh largest container shipping line will increase its total fleet capacity from 3.14 million TEUs to 3.76 million TEUs and boost its share of the world container fleet from 15.7 percent to 18.6 percent.
   The news comes just one day after the company confirmed it is putting its Brazilian cabotage subsidiary, Mercosul Line, up for sale in a preemptive move aimed at satisfying any potential competition concerns from Brazil’s Conselho Administrativo de Defesa Economica (CADE).
   São Paulo-based Mercosul Line, which operates four vessels with 2,500 TEUs of capacity each on two services connecting the country’s major seaports, currently controls around 21 percent of the Brazilian cabotage market, while Hamburg Süd subsidiary Aliança Navegação e Logística currently holds 59 percent, and the remainder is held by the companies’ sole competitor, Log-In Logística Intermodal.
   Bidders for the firm reportedly include CMA CGM of France; Geneva-based Mediterranean Shipping Co. (MSC); China’s COSCO Shipping; NYK of Japan; as well as Germany’s Hapag-Lloyd, which a few years back, bought Chilean north-south specialist CSAV.
   “Competitive shipping services are essential for European companies and for the EU’s economy as a whole,” Competition Commissioner Margrethe Vestager said of the conditional approval. “The commitments offered by Maersk Line and HSDG will maintain a healthy level of competition to the benefit of the very many EU companies that depend on these container shipping services.”