US DOJ is Investigating New Ocean Shipping Alliances
On the eve of the inauguration of two new mega-alliances, a report reveals that the alliances and their carrier members are subjects of a United States Department of Justice (DOJ) antitrust investigation.
The report from Reuters confirms that executives of Maersk, Hapag Lloyd, Evergreen, and Orient Overseas Container Line (OOCL) have been subpoenaed to testify as part of the investigation. According to the report, the FBI served the subpoenas last week while the executives attended a meeting of the International Council of Containership Operators in San Francisco.
This development is interesting for several reasons, one of them being that it opens a window to a policy dispute between the Federal Maritime Commission (FMC) and DOJ.
Members of the two groups include eleven of the world’s largest container carriers, collectively controlling about 45 percent of the global business. The proposed OCEAN Alliance includes CMA CGM, China Cosco Shipping, Evergreen, and OOCL. THE Alliance members are Hapag Lloyd, Yang Ming Marine, Mitsui OSK Lines, Kawasaki Kisen Kaisha, and NYK Lines.
These container shipping alliances allow carriers to share vessels and to operate joint services, carving out a limited exception to antitrust prohibitions. Pricing, marketing, and selling are all supposed to be independently managed and the subject of competition among alliance members.
It’s the FMC’s policy to examine the plans of the alliances to make sure that the restraints to competition are as narrowly tailored as possible. When the FMC approves such arrangements, it does so under congressional authority to make sure the combinations don’t unreasonably reduce services or increase prices to the shipping public. Critics say that ain’t necessary so.
And in this case the DOJ is one of those critics. In a letter to the FMC over its deliberations to approve the new alliances, the DOJ Antitrust Division said that “the proposed alliance consolidation raises serious competitive concerns.” “The collaboration proposed here,” the letter explained, “contemplates such close cooperation among its members that competition among them will be largely eliminated.”
Given that assessment, the current DOJ investigation shouldn’t come as much of a surprise.