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China Torpedoes P3 Alliance Plans

The Chinese Ministry of Commerce (MOFCOM) announced that they have not approved the P3 Network (P3) - P3 was a long-term operational vessel sharing agreement proposed by MSC, CMA CGM, and Maersk Line. By 24/7 Staff

China’s Ministry of Commerce said today that it would not approve plans for the P3 operational vessel sharing network that containership operators MSC, CMA CGM and Maersk Line had proposed.

Announcing its decision, the Ministry of Commerce said that the alliance, involving a large-scale cooperation of the three largest shipping companies, would have a profound impact on the global shipping industry, and that its analysis of the case related to market share, market power, market entry, industry characteristics and other factors. It said that the alliance would control 47% of the Asia-to-Europe container shipping market.

The parties had “failed to demonstrate that the alliance would bring more benefit than harm or that it is in line with the public interest.” Accordingly, the Ministry decided to ban the alliance under the People’s Republic of China Anti-Monopoly Law.

The P3 alliance had earlier received approvals from both the U.S. Federal Maritime Commission and the European Commission and was scheduled to start operations in the autumn of 2014.

The Chinese decision appears to have surprised the P3 partners.

Maersk CEO Nils S. Andersen
Maersk CEO Nils S. Andersen: “The decision does come as a surprise to us, of course, as the partners have worked hard to address all the regulators’ concerns. The P3 alliance would have enabled Maersk Line to make further reductions in cost and CO2 emissions and not least improve its services to its customers with a more efficient vessel network.

Nevertheless, I’m quite confident Maersk Line will accomplish those improvements anyway. It has delivered on those improvements over the last five quarters in the absence of P3 and I’m confident it will continue to do so,” said Group CEO Nils S. Andersen.

“The P3 partners take note of and respect MOFCOM’s decision. Subsequently, the partners have agreed to stop the preparatory work on the P3 Network and the P3 Network as initially planned will not come into existence,” they said today

“In Maersk Line we have worked hard to address the Chinese questions and concerns. So of course it is a disappointment. P3 would have provided Maersk Line with a more efficient network and our customers with a better product. We are committed to continuing to be cost competitive and offer reliable services,” said Vincent Clerc, Chief Trade and Marketing Officer, Maersk Line.

About P3
On 18 June 2013, Maersk Line, MSC Mediterranean Shipping Company S.A. and CMA CGM announced their intention to establish a long-term operational vessel sharing agreement on the East – West trades, called the P3 Network (P3). The overall aim with P3 was to make container liner shipping more efficient and improve service quality for the shippers due to more frequent and reliable services.

P3 was intended to be an operational, not a commercial, cooperation.

On 24 March 2014, the U.S. Federal Maritime Commission (FMC) decided to allow the P3 Network agreement to become effective in the US, and on 3 June 2014, the European Commission informed the P3 partners that it had decided not to open an antitrust investigation into P3 and had closed its file.

P3 was scheduled to start operations in the autumn of 2014.

Related: Is China right about “virtual” ocean carrier cartels?

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