By Dominic Chopping
The world's three largest container-shipping operators abandoned
plans for a globe-spanning alliance that had promised to reshape
the shipping industry, after Chinese authorities ruled out allowing
the tie-up to go forward.
Denmark's AP Møller-Maersk said Tuesday that its Maersk Line,
along with French giant CMA CGM SA and Switzerland-based
Mediterranean Shipping Co. had ceased preparatory work on the
alliance, called the P3 Network, which they had expected to start
operating later this year.
The three shippers had previously won U.S. and European
regulatory approval, and Chinese approval had been widely expected
to follow.
Earlier this month, Chinese regulators were poised to approve
the deal, according to people familiar with the matter. Maersk had
previously said publicly the Chinese had expressed no concerns over
the tie-up.
"The decision does come as a surprise to us, of course, as the
partners have worked hard to address all the regulators' concerns,"
said Møller-Maersk Chief Executive Nils Andersen in a
statement.
"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," Møller-Maersk said in its statement.
Møller-Maersk said the decision not to go ahead with the
alliance won't have a material impact on the group's financial
results. Nevertheless, shares in the company fell more than 7%.
Jesper Christensen, an analyst at Alm Brand, said the importance
of the cancellation for Maersk shouldn't be overestimated, noting
that it was already "the most cost efficient container line in the
world" and that the failure of the deal could be a bigger problem
for the others shippers in the alliance. He added that the trio
could instead plan to ally with smaller liners, hoping Chinese
regulators wouldn't oppose such a deal.
The alliance was aimed at reducing operating costs amid weak
international trade and freight rates. Akin to a code-sharing deal
between airlines, it was envisioned to allow the world's top three
container-shipping operators by volume to cut costs by sharing
ships and port facilities. It would also have used each company's
geographic strengths to move cargo faster and cheaper, shipping
executives said.
The alliance would have positioned the three partners to control
up to 40% of all cargo capacity along routes from Asia to Europe
and across the Atlantic and Pacific oceans. The shippers had agreed
to jointly deploy 255 vessels between the three of them, sharing
capacity of 2.6 million containers along the busiest sea
routes.
Though such alliances aren't new, smaller shipping companies,
cargo forwarders and fuel suppliers have pressed regulators to rule
against this much larger combination, worried they will lose
leverage when negotiating their rates.
In a statement on its website posted late Tuesday local time,
China's Ministry of Commerce said it believed the shipping alliance
would control 47% of the Asia-to-Europe container shipping market.
The parties, it said, "failed to demonstrate that the alliance
would bring more benefit than harm or that it is in line with the
public interest."
Ministry officials didn't pick up the phone late Tuesday.
China has taken an increasingly strong stand in antitrust
matters, even those involving companies based outside the mainland.
Its global regulatory heft has grown along with its economy, as it
has become over the years a major consumer of everything from
energy and metals to electronics and services.
Major deals that have required China's approval include
Microsoft Corp.'s purchase of Nokia Corp.'s handset business
earlier this year and Google Inc.'s 2012 purchase of Motorola
Mobility Holdings Inc.
Approvals have sometimes come with serious conditions. Last
year, Beijing approved the $62 billion deal to combine mining
companies Glencore PLC and Xstrata only after Glencore agreed to
divest a giant copper mine in Peru. It also agreed to sell copper
concentrate to Chinese customers at specified prices. With Google
and Motorola, Chinese regulators approved the deal only after
Google said its Android mobile operating system be free and
available to a wide variety of manufacturers--a condition that
helps its growing domestic smartphone makers.
Pricing--and pricing power--have also become a major issue in
China. China has increasingly used competition laws set in 2008 and
anti-price-monopoly regulations, which took effect three years
later, to pursue allegations of price manipulation. In recent years
it has taken aim at pricing in a number of industries ranging from
baby milk powder to semiconductors to eye-care products.
Costas Paris in London, Clemens Bomsdorf in Copenhagen and Grace
Zhu in Beijing contributed to this article.
Write to Dominic Chopping at dominic.chopping@wsj.com
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