The European Commission has cleared under the EU Merger Regulation the proposed acquisition of Neptune Oriental Lines (NOL) of Singapore by rival CMA CGM. The clearance is conditional upon NOL leaving the G6 liner shipping alliance.
Commissioner Margrethe Vestager, in charge of competition policy, said: “Container liner shipping plays a central role in global trade, so competition in this sector is essential for businesses and consumers in the EU. Today’s decision ensures that the takeover will not lead to price increases for the many EU companies using these container shipping services.”
The Commission’s investigation
The transaction leads to the combination of two competitors in the container liner shipping business. Like many other carriers, CMA CGM and NOL offer their services on many trade routes mainly through cooperation agreements with other shipping companies known as “consortia”. Consortia with the same members operating across several trade routes are often grouped into alliances. CMA CGM is a founding member of the Ocean Three Alliance (“O3”) whereas NOL is currently a member of the G6 Alliance.
The Commission examined the effects of the merger on competition for container liner shipping services on seventeen trade routes connecting Europe with the Americas, the Middle East, the Indian Subcontinent, the Far East as well as Australasia & Oceania.
Consortia members decide on capacity setting, scheduling and the list of ports of call, which are all important parameters of competition. The Commission found that the merger, as initially notified, would have created new links between previously unconnected consortia in the O3 and G6 alliances.
The Commission had concerns that these potential new links would have resulted in anti-competitive effects on two trade routes: (i) between Northern Europe and North America, and (ii) between Northern Europe and the Middle East. On these routes, competition from liner shippers who have no connection with the merged entity or its alliance partners would have been insufficient. As a result, the transaction could have enabled the merged entity, through the consortia that the two companies belong to, to influence capacity and therefore prices to the detriment of shippers and consumers for a very large part of those markets.
The transaction would also create limited vertical links, arising from CGM CMA’s activity in container terminal services, which may be required by container liner shipping companies. However, the Commission found no competition concerns in this area because of the companies’ limited market share in most upstream markets and the small increment brought about by the transaction on the downstream markets.
The Commitments
In order to address these concerns, the companies offered to make the transaction contingent upon the removal of the link that would have been created between CMA CGM’s O3 Alliance and NOL’s G6 Alliance. Although CMA CGM had previously stated publicly that it intended to remove NOL from the G6 alliance, the formal commitment to do so was necessary to remove the risk of anti-competitive effects on the two trade routes described above.
Although NOL will continue to operate for G6 until 31 March 2017 to guarantee an orderly exit, the commitments foresee that a trustee will ensure that no anti-competitive information is shared between the alliance and the merged entity during that remaining period. This will eliminate the potential additional links between previously unrelated consortia that the merger would have created on the two routes.
In view of the remedies proposed, the Commission concluded that the proposed transaction, as modified, would no longer raise competition concerns. The decision is conditional upon full compliance with the commitments. The transaction was notified to the Commission on 8 March 2016.
Source: europa.eu