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Shipping alliance of 4 biggest container operators gets US nod

United States regulators have approved a new alliance between four of the world’s largest container operators.

The US Federal Maritime Commission voted to allow the Ocean Alliance, an agreement among France’s CMA CGM, China’s Cosco Group, Hong Kong’s Orient Overseas Container Line and Taipei-based Evergreen Marine, to become effective as of Monday.

The FMC, which governs the US international ocean transportation system, delayed its initial approval citing concerns about fair pricing for shippers moving cargo in and out of the US The FMC announcement Friday said the decision “follows an exhaustive review process” that “thoroughly examined all aspects of the proposed agreement to assure that competition in the ocean transportation industry would not suffer.”

Federal Maritime Commission

Federal Maritime Commission logo

Commissioner William Doyle of the FMC said in a statement Friday that he approved the alliance after significant changes were made to the original agreement. The agreement now ensures that “parties are limited in their ability to use their collective market power to jointly negotiate contracts” with third parties, Mr. Doyle said.

He added that the language in the Ocean Alliance agreement is now similar to what exists in the alliance agreement known as 2M, between Maersk Line – the A.P. Moller-Maersk shipping unit that is the world’s biggest container line by capacity – and No. 2 global operator Mediterranean Shipping Co.

The parties to the Ocean agreement will be permitted to share their ships, charter space on each other’s vessels and enter arrangements on major international trade lanes. The alliance is slated to become operational in April, 2017.

Shipping alliances have taken on increased importance in a global-shipping industry buffeted by overcapacity and slowing volumes. While freight rates have fallen sharply in recent years, the industry remains highly fragmented. Alliance partners share ships, networks and port calls, which can cut their costs by hundreds of millions of dollars annually.

The new Ocean Alliance will challenge the dominance of the 2M, which has a 16% market share in the Asia to North America route and a 34% share for Asia to Europe. A third grouping called THE Alliance, made up of German, Japanese and Korean operators, is awaiting regulatory approvals and will have a 39% market share for Asia to North America and 30% for Asia to Europe.

Some shipping customers have raised concerns about the spread of vessel-sharing agreements in recent years, saying they make handling shipments at ports far more complicated and costly. Container operators say by next year, the alliances will offer better service compared with individual operators. Their shared resources will give cargo owners more sailings at the best price, they have argued.