Japanese carriers weigh their options following Competition Commission ruling

Japanese shipping lines

Nippon Yusen Kabushiki

Kaisha (NYK), Mitsui OSK

Lines (MOL) and Kawasaki

Kisen Kaisha (K-line) are

currently “considering the

reasons” for a decision

by the South African

Competition Commission

(CC) to block the proposed

container business joint

venture (JV) between the

three parties.

“In South Africa the

competition tribunal has

the power to review and

reconsider the decision

of the Competition

Commission. We will

continue to engage with the

Commission in the course

of the proceedings,” said

the three parties in a joint

response to FTW following

last Friday’s announcement

by the CC.

Sipho Ngwema, CC head

of communications, said

history had shown – based

on previous collusion in this

sector in other parts of the

world – that the structure of

the container liner shipping

market was conducive to

collaboration.

“The merger increases the

likelihood of coordination as

it creates further structural

linkages in the container

liner market,” he said,

adding that the commission

had also found that the

proposed transaction

“creates a platform for

coordination in the car

carrier market which has

a history of collusion

involving the merging

parties”.

Ngwema confirmed to

FTW that in terms of the

Competition Act (89 of 1998),

the parties could apply to the

Competition Tribunal for the

CC’s decision on the merger to

be reconsidered.

He explained that the

CC consulted industry

players – such as customer

service, competitors, industry

experts as well as industry

associations – before making a

final decision on any proposed

joint venture or merger.

“We also rely on industry

reports and research. We

use telephonic and written

enquiries to get submissions

from parties and we also hold

meetings with stakeholders

where possible,” Ngwema

pointed out.

He conceded that some

industries were “more complex

than others”, noting that

the CC might, under certain

circumstances, solicit the

services of an independent

industry expert to assist with

industry background as well

as to “understand the practical

workings of a market”.

“The Commission also

goes on field investigations to

try and understand markets

better in order to arrive at

an accurate determination.

In this case however, the

Commission did not solicit

external assistance as it is

familiar with the industry,”

said Ngwema.

The three parties said they

were currently investigating

the impact the CC’s decision

might have on their proposed

transaction. “However, on

the whole, the parties are

continuing the preparation

work aiming for the

commencement of the JV’s

global operations in April

2018 as scheduled,” they

added.

Globally, while the the

Competition Commission of

Singapore (CCS) was the first

jurisdiction to approve the

merger in March this year,

the proposed JV was rejected

by the United States Federal

Maritime Commission

(FMC) on the basis that it did

not have the jurisdictional

authority to make the call.

The matter has now been

referred to the US Department

of Justice (DoJ), with some

US media speculating that

this could delay the proposed

merger.

Responding to FTW

regarding global developments,

the three lines said: “We

would like to refrain from

commenting on the specific

developments. We are working

diligently and appropriately in

all relevant jurisdictions.”