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Commissioner Doyle Votes on Maersk/MSC (2M) Vessel Sharing Agreement

October 9, 2014

Commissioner William P. Doyle Votes on Maersk/MSC Vessel Sharing Agreement, FMC Agreement No. 012293 (otherwise known as 2M).

I am in favor of not taking any further action to delay the implementation of this vessel sharing agreement, popularly known as 2M. Maersk Line and Mediterranean Shipping Company answered all my questions over the past forty-five days. The Companies sent two executives from Europe to the Federal Maritime Commission’s headquarters and met me personally. They followed up after the meeting with written responses to my questions regarding their proposed vessel sharing agreement. In addition, I had several follow-up conversations with principals.

The 2M VSA consists of A.P. Moller-Maersk A/S, trading under the name of Maersk Line, and MSC Mediterranean Shipping Company, S.A.

I have reviewed all the comments submitted by the public, submitted my own questions to the Parties, and reviewed the Parties’ responses.

Overview of FMC Authority: 6(g) Analysis

The FMC has the responsibility to review all agreements prior to their implementation and to seek to enjoin any agreements that are substantially anticompetitive. Under the Shipping Act of 1984, the Commission evaluates agreements for potential anti-competitive activity under what is known as the 6(g) standard:

Action by commission.— If, at any time after the filing or effective date of an agreement under chapter 403 of this title, the Commission determines that the agreement is likely, by a reduction in competition, to produce an unreasonable reduction in transportation service or an unreasonable increase in transportation cost, the Commission, after notice to the person filing the agreement, may bring a civil action in the United States District Court for the District of Columbia to enjoin the operation of the agreement. The Commission’s sole remedy with respect to an agreement likely to have such an effect is an action under this subsection. 46 U.S.C. § 41307(b)(1)

The FMC’s Bureau of Trade and Analysis is responsible for competition review and market analysis, and is an expert on the economics of international liner shipping and maritime agreements. Through their analysis of the Maersk/MSC Vessel Sharing Agreement and subsequent representations, it appears that the Agreement is not likely, at this time, through a reduction in competition, to result in an unreasonable increase in transportation service or an unreasonable increase in transportation costs.

While the two largest global carriers 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 have available more service offerings and overall capacity will increase.

I am particularly pleased that the 2M Parties adopted the language from the previously proposed P-3 network agreement related to negotiations with third parties, suppliers, small businesses, and other service providers.

I also appreciate 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.

In addition, by virtue of the agreement, the 2M parties state that it will lead to approximately a 10 % combined reduction in fuel consumption, CO2 emissions, and air emissions such as particulate matter, sulphur oxides emissions, and nitrogen oxides emissions.

The Commission will implement its typical monitoring program. The Commission’s monitoring program should be reevaluated to fully ensure that all Alliances play by the rules. I am committed to ensuring that this happens.

In conclusion, it appears that the 2M Agreement is not likely, through a reduction in competition, to result in an unreasonable increase in transportation service or an unreasonable increase in transportation costs.