FMC withholds approval of Japanese ocean carrier merger

The ocean carrier industry was handed another setback by a major regulatory agency this week as the proposed merger of three Japanese liner companies was rejected by the U.S. Federal Maritime Commission (FMC).

The unanimous decision to nix the Tripartite Agreement comprising Kawasaki Kisen Kaisha, Ltd. (K Line); Mitsui O.S.K. Lines Ltd. (MOL); and Nippon Yusen Kaisha (NYK) represents a fresh challenge to the “3-J” alliance for the time being. Furthermore, delays in Japanese antitrust approval means that the carrier’s contract deadline for next month will be missed.

“In order to receive the benefits of a merger, one needs to first merge,” says FMC commissioner, William P. Doyle 

Much of what the Tripartite parties were asking for, adds Doyle, revolved around pre-merger or pre-consolidation coordination.  For example, the parties were seeking authority to share information and conduct joint negotiations with third party businesses in the United States for as much as year in advance of any potential merger. 

“These provisions would violate ‘gun jumping’ laws that forbid the sharing of competitively sensitive information or the premature combining of the parties,” adds Doyle.

Chris Rogers, an analyst with the consultancy Panjiva, is not particularly alarmed by FMC’s decision, which he describes as “technical in nature.” More of a worry, however, is the ongoing Department of Justice (DoJ) investigation of the container liner industry and what Rogers describes as “Congressional concerns” about alliances more broadly.

In an advisory letter written by DoJ assistant district attorney general, Renata Hesse, called upon the FMC to forbid the creation of the OCEAN Alliance, or to at least have the carriers rewrite the agreement to ensure competition.

“The DoJ has long taken the position that the general antitrust exemption for international ocean shipping carrier agreements is no longer justified,” she says.

For the time being, however, both the Ocean Alliance and THE Alliance still control 45 percent of the global business by sharing vessels and operating joint services.