FMC rejects 'Big 3' Japanese shipping deal

Time: 2017-05-05 13:35
US maritime regulators have rejected an agreement that would have allowed the top three Japanese container lines to merge operations, saying they didn't have the authority to review and approve the creation of a new entity.
The US Federal Maritime Commissioners (FMC) voted 4-0 to reject "K" Line, MOL, and NYK Line's plan to share information with each other ahead of the merging of their container operations in July, saying the Shipping Act of 1984 doesn't provide them authority to review and approve mergers, IHS Media reported.
"This decision by the FMC in no way precludes the Japanese carriers from merging their container trade business units into a single standalone company," FMC Commissioner William Doyle said in a statement. "Rather, the vote recognises that the FMC cannot approve certain actions that would allow the three Japanese companies to act as a merged entity prior to actually merging."
The Department of Justice in conjunction with the Federal Trade Commission (FTC) will decide whether to allow the carriers to merge operations for US services.
The vote to reject the agreement comes a day ahead of a House subcommittee hearing in which lawmakers are expected to question container lines, marine terminals, and the FMC on allegations that major shipping line alliances are unfairly squeezing third-party suppliers, namely tugboat operators.
"Much of what the tripartite parties were asking for revolved around premerger coordination," Mr Doyle said. These provisions would violate "gun jumping" laws that forbid the sharing of competitively sensitive information or the premature combining of the parties, the Wall Street Journal reported.
"K" declined to comment. NYK didn't return requests for comment and MOL couldn't be reached for comment.
The three Japanese liners had expected to complete their tie-up by July at the earliest and start operating in 2018. The carriers have said the combined operation would hold a 7 per cent global market share and save them around JPY110 billion (about US$1 billion, annually.
The proposed merger, which will create the world's sixth biggest container player, is an attempt to cope with a dramatic decline in freight rates and shipping volumes for companies that move the vast majority of manufactured goods across the oceans.
The industry's downturn has led to an increasing number of alliances and moves toward consolidation, while also leading to the bankruptcy last year of South Korea's Hanjin Shipping Co, once the world's seventh largest shipping line.
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