FMC Clarifies Review of Japanese Carriers' JV Plan

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By The Maritime Executive 05-08-2017 09:33:10

On Friday, the U.S. Federal Maritime Commission clarified earlier remarks about an antitrust review of a joint venture that would combine the operations of NYK, "K" Line and MOL. The FMC has referred the carriers' proposed joint service agreement to the Justice Department for review – not because it believes that the carriers have violated any antitrust law provisions, but because the proposal is outside of FMC's jurisdiction. Certain publications have misreported the reason for the referral, said Acting FMC Chairman Michael Khouri (ed.: not Maritime Executive).

"It is unfortunate that such misinformation is circulating in the trade press about the Commission’s deliberations in this matter suggesting that the FMC considered whether the authority sought by parties would violate antitrust laws administered by other competition agencies," Khouri said. "To our knowledge, these corporations came to the Commission in good faith with the single purpose of trying to comply with all U.S. laws." 

"The Commission made only one finding – that the Tripartite Agreement falls outside the jurisdiction of the Shipping Act of 1984. The Commission made no determination of any kind regarding the agreement parties’ commercial activities regarding their compliance with the general antitrust laws that are administered by other federal agencies," Khouri clarified. 

He noted that the Shipping Act explicitly excludes acquisition agreements, and the FMC is only empowered to review more limited cooperation agreements, like the Ocean Alliance or THE Alliance, in which the parties generally maintain their original identities and independence. The Commission has determined only that the tripartite proposal does not fall in this category, and is outside of its jurisdiction – not that it is in any way unlawful. 

The "Tripartite Agreement" proposes to fuse the overseas container businesses of the three Japanese ocean carriers – NYK, "K" Line and MOL – into one new entity, effective July 1. The agreement is intended to give the partners greater economies of scale in a market that is increasingly dominated by the largest players. “By strengthening the global organization and enhancing the liner network, we will be able to provide higher quality services and unlock new value in order to exceed our clients’ expectations,” the carriers said in announcing the joint venture last year.

In a written statement issued May 3, FMC commissioner William P. Doyle explained why he had voted against the three carriers' initial proposal. "The vote recognizes 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 Shipping Act does not provide the Federal Maritime Commission with authority to review and approve mergers," Doyle said. "In order to receive the benefits of a merger, one needs to first merge . . . [and] much of what the Tripartite parties were asking for revolved around pre-merger or pre-consolidation coordination."