Korea’s antitrust regulator ordered Maersk Line to withdraw Hamburg Sud from the latter’s sharing agreements with other major operators on some trade routes, Tuesday, citing possible unfair competition.
Maersk, the world’s largest container shipper based in Denmark, announced last year its plan to acquire its German rival, the seventh-largest container shipper, for $4 billion (4.35 trillion won). The deal is set to close by the end of the year.
In April, the two companies sought a review of their merger from the Fair Trade Commission (FTC), as foreign-based firms are required to get approval for a proposed merger if their annual sales here top 20 billion won ($18.4 million).
“The FTC has issued an order for Maersk Line to withdraw Hamburg Sud from the Far East- Central America and Caribbean Sea trade routes and not to extend the German firm’s alliance with others on the Far East Asia-West Coast of South America route,” the watchdog said in a press statement.
The sharing agreement on the Far East-Central America and Caribbean Sea services is poised to be renewed automatically in August 2018, while that of the Far East Asia-West Coast of South America route expires next March.
“If Maersk’s acquisition of Hamburg takes place without addressing those issues, it could restrict competition on the routes.”
The German shipping firm has formed alliances with five shippers on such routes, the FTC added.
“The merger will form connections between Maersk and three shipping firms from Hamburg’s consortium on both routes, which will make Maersk’s four competitors, including Hamburg, disappear,” it said.
“As a result, it is likely to cause adverse effects, including a fare hike.”
According to the FTC, the combined share of the two companies on the Far East-Central America and Caribbean Sea trade route accounted for 33.3 percent in 2016, but it increases to 54.1 percent if the shares of the consortium members are added.
On the Far East Asia-West Coast of South America route, the share soars from 37.6 percent to 65.9 percent, the regulator added.
Also, the FTC ordered Maersk and Hamburg Sud not to join the alliance or reach a sharing agreement with other shipping firms for five years following expiration of the agreement.
“It is the FTC’s first corrective actions to a horizontal merger in the container shipping industry. We carried out analyses, based on market shares by each consortium, in order to prevent restraint on competition,” an FTC official said.
Source: Hellenic Shipping News.