Marc J. Fink, Member, Cozen O'Connor

https://www.cozen.com
Author picture

Marc J. Fink

In my commentary last year, I posed the question of whether ocean carrier alliances would seek to enlarge the scope of their cooperation beyond the sharing of vessels. While we still cannot answer this question with any precision, the trend appears to be that alliances will (and perhaps must) pursue increased joint activities and initiatives to enhance efficiencies and reduce costs. The recent wave of consolidations and the Hanjin bankruptcy indicate that carriers must either be more aggressive in cost savings to improve their bottom lines, or risk extinction. Joint procurement of various services and products is one important way this might be done.

However, in order to engage in such concerted conduct, alliances must comply with the US Shipping Act, as well as competition or other relevant laws in other countries. To date, regulatory authorities have approved the formation and implementation of all but one alliance — the proposed P3 Alliance comprised of Maersk, MSC, and CMA CGM. The common perception is that alliances can provide significant benefits, and governments should not stand in the way of a natural evolution of the industry.

To the extent joint procurement or other cooperative activities aid alliance operations and contribute to cost savings, government regulators should continue to allow alliance operations to grow and evolve. Unfortunately, at least in the US, it is not clear that view will prevail. Some recent statements suggest that at least some commissioners believe the Federal Maritime Commission should be wary of alliance joint procurement, and, in any event, must analyze each and every joint procurement action before it can be implemented. Needless to say, if that policy goes forward, the burden of government regulation will be significantly increased.

To the extent government regulators inhibit or unduly interfere with necessary and appropriate alliance business practices, critical service improvements and cost savings may be thwarted