EC approves Hapag-UASC tie-up

The European Commission has given clearance to the merger of Hapag-Lloyd and United Arab Shipping Co., which will create the fifth largest container carrier worldwide, subject to certain conditions, the EU competition watchdog said in a statement.    The European Commission has granted conditional approval of the merger between Germany’s Hapag-Lloyd and Dubai-based United Arab Shipping Co. (UASC), the European Union competition watchdog said in a statement.
   Approval from the EC, which examined the potential tie-up under the EU Merger Regulation, is conditional on the withdrawal of UASC from slot-sharing agreements on the transatlantic trades between North Europe and North America. The combined carrier “would have faced insufficient competitive constraints” on those trades, the EC said.
   With a combined 1.58 million TEUs, the merged company would be the fifth largest container carrier worldwide by operating fleet capacity, according to ocean carrier schedule and capacity database BlueWater Reporting.    The EC noted that UASC, like most ocean carriers these days, offers services on the major east-west trades primarily through cooperation agreements with other shipping companies, i.e. alliances and vessel sharing agreements. These groups, also referred to as “consortia” by the EC, “decide jointly on capacity setting, scheduling and ports of call, which are all important parameters of competition.”
   The commission found that the initial proposal would have brought together two separate alliances, meaning that “the merged entity could have influenced capacity and prices on a very large part of those markets, to the detriment of customers and, ultimately, consumers.”
   In order to address these concerns, Hapag-Lloyd has said it would terminate UASC’s participation in the NEU1 consortium, which will “entirely remove the additional link between Hapag-Lloyd’s and UASC’s consortia, that the transaction would have created on the Northern Europe-North America trade routes,” and “the merged entity’s position on these trade routes will be comparable to that of Hapag-Lloyd today,” the EC said.
   “Although UASC will continue to operate as part of the NEU1 consortium during the notice period to guarantee an orderly exit, a monitoring trustee will ensure that no anti-competitive information is shared between the NEU1 consortium and the merged entity during that notice period,” it added. “The Commission therefore concluded that the proposed transaction, as modified by the remedies proposed, would no longer raise competition concerns. The decision is conditional upon full compliance with the commitments.”
   The EC found no competition concerns, however, in the vertical integration of the two carriers’ container terminal, inland transportation, freight forwarding, and harbor towage service offerings, as there are enough other providers in these markets to provide for sufficient competition.
   “European companies rely on container liner shipping services for their transatlantic shipments. It’s very important that the markets remain open,” Margrethe Vestager, commissioner in charge of competition policy, said in a statement. “The commitments offered by Hapag-Lloyd ensure that the takeover will not lead to price increases on the routes between Northern Europe and North America.”