Beijing scuppers shipping link-up

Beijing scuppers shipping link-up

China has scuppered a deal to create a shipping alliance on the world’s three biggest trade routes in a sign of the increasingly muscular approach being taken by the country’s competition authorities.

AP Møller-Maersk, Mediterranean Shipping Company and CMA CGM had hoped to form the so-called P3 Network to reduce costs on Asia-Europe, trans-Pacific and transatlantic routes by pooling 250 ships. The companies abandoned their plans after China’s commerce ministry concluded the alliance was not in the public interest.

The tie-up was designed to shake up container shipping, synonymous with global trade, by reducing the chronic over-capacity that has caused most operators to be lossmaking. The deal stopped short of a full merger as the three companies, which together control 40 per cent of global seaborne trade, would have competed on price.

But Chinese regulators estimated that the alliance would control 47 per cent of container traffic on Asia-Europe routes, “greatly increasing market concentration”. Their rejection came despite approval from EU and US regulators, although Brussels had reserved the right to monitor the alliance.

Susan Ross, a partner at law firm Mitchell, Silberberg & Knupp in Los Angeles, said the decision served as a warning for western companies to pay attention to Chinese regulators. But she added: “The Chinese view this as a threat to their shipping industry, even if they dress this up in other language.”

China’s rejection is one of the most high-profile uses of its six-year-old merger review system.

It has mostly set conditions on global mergers or pushed companies to make disposals, as Glencore did to complete its takeover of Xstrata.Additional reporting by Tom Mitchell in Beijinghttp://www.ftchinese.com/

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