U.S. FMC Gives Green Light to 2M

Richard Lidinsky was the only FMC Commissioner to vote against 2M

The U.S. Federal Maritime Commission (FMC) has announced it has concluded its review of the proposed 2M shipping alliance between Maersk Line and Mediterranean Shipping Co., giving the go-ahead to the deal.

Four of five FMC Commissioners assented to the proposal, with only Richard Lidinsky voting to disallow the alliance.

"The Commission's decision, from which Commissioner Lidinsky dissents, will allow the Agreement to become effective, as scheduled on Saturday, October 11, 2014," said a statement by the FMC.

"The Commission's decision is based on a determination that the agreement is not likely at this time, by a reduction in competition, to produce an unreasonable increase in transportation cost or an unreasonable reduction in transportation service under section 6(g) of the Shipping Act," it continued.

Scrutiny will continue after approval

FMC Commissioner William Doyle elaborated separately that he expects services to improve and that prices will remain freely negotiable.

"While the two largest global carriers will be collaborating operationally, these carriers will continue to compete with each other on pricing and cost…that is, shippers will continue to negotiate with each carrier individually," explained Doyle.

Others have been sceptical that freight rates will increase as services are cancelled to boost demand.

"Operators might set up an extremely damaging situation to world trade," wrote European Shippers' Council Chairman Denis Choumert to the FMC recently in relation to the FMC's consideration of 2M.

But the FMC has said 2M will be subject to future scrutiny, even after the approval.

"The Commission's action also imposes reporting requirements on the Agreement parties to assist the Commission in its ongoing, close monitoring of the agreement," said the FMC.

Doyle added separately that the FMC reserved the right to take action in civil courts should it become clear at any time that services or prices were being unreasonably affected by distortion of competition resulting from the alliance.

It was recently reported that officials from the 2M companies have been courting regulatory officials in both China and the U.S. aiming to ensure smooth passage of the alliance, with Doyle citing recent personal representations made to him by company executives as one reason for his decision.

"It is expected that the parties will start their operations under the agreement in January 2015," Maersk Line was quoted as saying by the Wall Street Journal.

Proposed competitor alliance Ocean Three will also require FMC approval before it can take effect.