The Ministry of Commerce of the People's Republic of China (hereinafter referred to as the "MOFCOM") received the anti-monopoly declaration of the concentration of undertakings on the case of acquisition of the equity of Hamburg Südamerikanische Dampfschifffahrts –Gesellschaft KG(hereinafter referred to as "Hamburg Südamerikanische") by Maersk Line A/S (hereinafter referred to as "Maersk Line").Upon review, the MOFCOM decided to approve the concentration of undertakings with additional restrictive conditions. In accordance with Article 30 of the Anti-monopoly Law of the People's Republic of China (hereinafter referred to as the "Anti-monopoly Law"), relevant matters are hereby announced as follows:
I. Case-filing and review procedures
On March 29, 2017, the MOFCOM received the anti-monopoly declaration for the concentration of undertakings concerning the Case. Upon review, the MOFCOM considered that the documents for declaration were incomplete, and required the declarer to supplement. On April 27, after further supplementation, the MOFCOM confirmed that the documents for declaration complied with Article 23 of the Anti-monopoly Law, and therefore the anti-monopoly declaration for the concentration of undertakings was admitted to be filed, and the preliminary investigation was launched. On May 26, the MOFCOM decided to further review this concentration of undertakings. On August 23, the MOFCOM decided to further review this concentration of undertakings as agreed by the declarer. At the expiration of the extension, the declarer applies for the withdrawal of the case and receives the approval of the MOFCOM. On October 24, the MOFCOM filed the re-declaration of the declarer for review. After review, the MOFCOM believes that the concentration of the operators may exclude and restrict the competition effect of the general container transport market and the refrigerated container transport market of the Far East - South America West Coast route, the Far East - South America East Coast route. At present, the case is under preliminary review, and the deadline is November 22.
In the course of the review, the MOFCOM solicited opinions from relevant government departments, trade associations and enterprises, knew industry characteristics, relevant market definition, market participants, market structure, prospects and other aspects, and reviewed the authenticity, completeness and accuracy of the documents and materials submitted by the declarer.
II. General information of the Case
The acquirer, Maersk Line was first established in Denmark in 2013, and was originally traced back to 1928. The ultimate controller is A.P. Moller-Maersk A/S. Maersk Line is the largest container liner carrier in the world. Maersk Line and its associated enterprises are engaged in container liner transportation, logistics and container terminal operation, oil exploitation, tanker transportation and other business in the world.
The acquiree, Hamburg Südamerikanische was registered in Germany in 1950, and the ultimate controller is Dr. August Oetker KG. Hamburg Südamerikanische is the ninth largest container liner carrier in the world and is engaged in container liner transportation and bulk cargo transportation business around the globe.
On March 14, 2017, Maersk Line and Dr. August Oetker KG signed an agreement, according to which, Maersk Line will buy 100% stake in Hamburg Südamerikanische. After the completion of the transaction, Hamburg Südamerikanische will become a business unit within Maersk Line that will operate in name of Hamburg Südamerikanische.
III. Relevant markets
According to the Anti-monopoly Law, the Guidelines of the Anti-monopoly Committee of the State Council on Defining the Relevant Markets and other provisions, the MOFCOM defines the relevant commodity markets and related regional markets in this case.
(I) Relevant commodity markets.
After the examination, Maersk Line and Hamburg Südamerikanische have transverse overlap in the general container liner transportation, the refrigerated container liner transportation and tanker transportation markets; Maersk Line related enterprises are engaged in container production and sales operations and maritime cargo transport agency services in China, which has longitudinal association with the container liner transportation service. The related commodity markets of this case are those of the general container liner transportation, the refrigerated container liner transportation, tanker transportation, container, maritime cargo transport agency services.
1. The general container liner transportation and refrigerated container liner transportation markets.
Container liner transportation service refers to the provision of standard and repeated container freight transportation service for non-fixed owners in accordance with the prescribed operating rules according to the predetermined sailing schedule by container liner companies among the affiliated ports of the fixed routes. Container liner transportation services will be subject to freight the freight rates of the standard container (TEU or FFE) and there is no substitutability with non-liner transportation. There is no substitutability between container transportation and dry and bulk cargo transportation and tanker transportation.
From the point of view of service content, characteristics and price, container liner transportation services can be further subdivided into general and refrigerated ones. General container is used to transport goods without special temperature requirements. Refrigerated containers are mainly used to transport goods that need to be stored in cold storage environment. The refrigerated container can maintain the temperature of -30℃ to 20℃ during the transportation by connecting the power receptacle of the vessels. From the point of view of demand, shippers can only choose refrigerated containers to transport goods that should be stored at low temperature (such as meat, fruits, vegetables, seafood, etc.) during transportation. The transportation price of refrigerated containers is usually more than one time as much as that of ordinary containers. From the point of view of supply, refrigerated containers need to have a temperature insulation layer and power receptacle connecting the vessels. Each vessel will be equipped with a limited number of power receptacle since more power receptacles will greatly improve the cost. In order to keep the environment of low temperature and cold storage during transportation, refrigerated container transportation also has higher requirements for temperature control technology, and it is required to keep minimal temperature change during long distance transportation.
Therefore, the general container liner transportation and refrigerated container liner transportation services are respectively defined as different commodity markets.
2. Tanker transportation service market.
Both parties to the concentration operate liquid bulk tankers (hereinafter referred to as "tanker") providing transportation services for oil products. Tankers are equipped with oil tanks, pumps and loading and unloading equipment and other specific facilities, which can transport crude oil, gasoline and other liquid products. Tanker transportation service is irregular and operators look for business in the relevant areas, or undertake goods among different ports according to the situation of goods and customers' demand. From the point of view of service content, characteristics and price, tanker transportation services are defined as relevant commodity market.
3. Container market.
Maersk Line associated enterprises produce and sell containers in China. Container is the upstream product of container liner transportation enterprises. The anti-monopoly investigation showed that general container and refrigerated container share the same customer base. Although manufacturing technologies are different, the vast majority of container manufacturer produces at the same time general container and refrigerated container. The container liner transportation companies also purchase ordinary container and refrigerated containers of strong supply substitutability. Containers are defined as relevant commodity market.
4. Marine freight transportation agency service market.
Maersk Line associated enterprises are engaged in marine freight transportation agency services in China. The freight transportation agency service is to organize the transportation of goods, customs clearance, warehousing and ground services according to the needs of customers and on behalf thereof. Marine freight transportation agency service is different from land and air freight transportation agency service, constituting related commodity market.
(II) Relevant geographic market.
1. The general container liner transportation and refrigerated container liner transportation markets.
Trade routes are the basic elements of container liner transportation in the investigation of related regional markets. In this case, general and refrigerated container liner transportation air routes having overlap and covering ports in China include Far East - Northern Europe, Far East - Indian Subcontinent, Far East - Middle East, Far East - Oceania, Far East - South Africa, Far East - the east coast of North America, Far East - west coast of North America, Far East - South America East Coast, Far East - South America West Coast, Far East - Mediterranean and Far East - Central America and Caribbean, 11 in total). Each air routes can be further subdivided according to two courses.
2. Tanker transportation service market.
According to the practice of the industry, tanker operators can deploy vessels globally, providing flexible tanker transportation services, without regular routes. The relevant regional market of tanker transportation service is the global market.
3. Container market.
Container vendors compete globally to sell to customers worldwide. At the same time, the transportation cost of container products is low to some extent and there is no substantial barrier to import and export. The related regional market of container is the global market.
4. Marine freight transportation agency service market.
As the demander usually chooses the goods agency service throughout the country, the marine freight transportation agency service providers also provides service and compete at home. The relevant regional market of the marine freight transportation agency service is defined as China.
IV. Competitive analysis
The MOFCOM deeply analyzed the impacts of the concentration of undertakings on market competition in terms of the market share and market control force of the undertakings participating in concentration on the relevant market, the market concentration level, the complexity of access to the market concerned, impact on consumers and other operators and other factors as required in Article 27 of the Anti-monopoly Law.
The anti-monopoly investigation shows that, with respect to the above 11 general container liner transportation and the refrigerated container liner transportation services of lateral overlap, in addition to the Far East - South America West Coast and Far East - South America East Coast, with respect to other nine routes (Far East - Northern Europe, Far East - Indian Subcontinent, Far East - Middle East, Far East - Oceania, Far East - South Africa, Far East - the east coast of North America, Far East - west coast of North America, Far East - Mediterranean, Far East - Central America and Caribbean), the market share increments as a result of concentration and the market share subject to merger is small, which is difficult to produce the effect of eliminating or restricting competition on the market. In the global tanker transportation service market, the total market share of Maersk Line associated enterprises and Hamburg Südamerikanische is [0-5]%, and there are many competitors in the market. This concentration is difficult to eliminate and limit the competition in this market. With respect to the global container market and Chinese marine freight agency service market that have vertical relationship with the container liner transportation service, the market share of Maersk Line associated enterprises is [5-10]% and [0-5]% respectively, and there are many competitors in the market. Hamburg Südamerikanische has no relevant business. Both sides do not have the ability to carry out the vertical blockade. Therefore, it is difficult to exclude and restrict the competition effect in the vertical related market.
Anti-monopoly investigation shows that the concentration may exclude and restrict the competition effect of the general and refrigerated container transport market of the Far East - South America West Coast route and the Far East - South America East Coast routes. Far East includes three countries of Eastern Asia (China, Japan and South Korea); South America West Coast refers to four countries of the west coast of South America (Peru, Chile, Ecuador and Columbia), and South America East Coast includes three countries along the east coast of South America (Brazil, Uruguay and Argentina).
(I) After the concentration, Maersk Line may weaken the competition of the general container transport market and the refrigerated container transport market via the Vessel Sharing Agreement to which Hamburg Südamerikanische is a party with respect to the Far East - South America West Coast route and the Far East - South America East Coast route.
1. Vessel Sharing Agreements involved.
Container liner transportation is a capital-intensive industry, which needs huge capital and has high risks. In order to reduce costs and improve efficiency, shipping enterprises often carry out a certain degree of cooperation in forms mainly including ship sharing agreements, shipping alliances and so on. According to the vessel sharing agreement, several liner companies provide regular liner services on a route. Each company shares the shipping space of each vessel on the route, and is responsible for the cost and operation of the vessel involved. Shipping alliance is a collection of vessel sharing agreements covering multiple routes.
In the vessel sharing agreement, companies do not share sensitive information such as price and cost, but they decide the flight frequency, input capacity, available shipping space, ports and so on. These are the focus of competition for the liner company, and also important factors for owners to choose liner service. Therefore, although the vessel sharing agreement can reduce operating costs and improve vessel utilization rate, there is also the possibility of weakening competition.
According to the anti-monopoly investigation, Maersk Line has not signed the vessel sharing agreement in Far East - South America West Coast route and Hamburg Südamerikanische has joined Asia - South America West Coast Vessel Sharing Agreement (hereinafter referred to as the "ASPA Agreements").Maersk Line has not signed the vessel sharing agreement in Far East - South America East Coast route and Hamburg Südamerikanische has joined Asia - South America East Coast Vessel Sharing Agreement (hereinafter referred to as the "Asia 2 Agreement").
2. Market share and market control.
When reviewing the impact of the above vessel sharing agreements on competition, the MOFCOM calculates the total market share of both parties to the concentration and the vessel sharing agreement to which they are parties. In the calculation of market share, the MOFCOM conducted investigations from two dimensions, the actual volume and carrying capacity of liner companies.
After investigation, after the concentration, in terms of the carrying capacity of Far East - South America West Coast route, the aggregate market share of ordinary and refrigerated container transport markets of Maersk Line and parties to ASPA Agreements is [70-75]%;the aggregate market shares of ordinary and refrigerated container transport markets in northing route (from South America West Coast to Far East) are [70-75]% and [70-75]%, respectively. The aggregate market shares of ordinary and refrigerated container transport markets in southing route (from the Far East to the South America West Coast) are [70-75]% and [70-75]%, respectively. In terms of the carrying capacity, the aggregate market shares of ordinary and refrigerated container transport markets of Maersk Line and parties to ASPA Agreements are [70-75]% and [75-80]%, respectively. Therefore, after the concentration, in the Far East - South America West Coast route, Maersk Line will enhance market control force via ASPA Agreements.
After the concentration, in terms of the carrying capacity of Far East - South America East Coast route, the aggregate market shares of ordinary and refrigerated container transport markets of Maersk Line and parties to Asia 2 Agreement are [55-60]% and [60-65]%;The aggregate market shares of ordinary and refrigerated container transport markets in northing route (from South America East Coast to Far East) are [55-60]% and [60-65]%, respectively. The aggregate market shares of ordinary and refrigerated container transport markets in southing route (from the Far East to the South America East Coast) are [55-60]% and [75-80]%, respectively. In terms of the carrying capacity, the aggregate market shares of ordinary and refrigerated container transport markets of Maersk Line and parties to Asia 2 Agreement are [45-50]% and [40-45]%, respectively. Therefore, after the concentration, in the Far East - South America East Coast route, Maersk Line will enhance market control force via Asia 2 Agreement.
3. It is difficult for other competitors to form an effective competitive constraint on Maersk Line after the concentration.
The anti-monopoly investigation shows that other competitors than those to vessel sharing agreements to which Maersk Line and Hamburg Südamerikanische are parties in the Far East - South America West Coast and Far East - South America East Coast routes are smaller in volume and shipping capacity and it is difficult to form effective competitive constraint on Maersk Line after the concentration.
In Far East - South America West Coast route, in addition to Maersk Line and ASPA Agreements, container liner transportation services are also provided according to Alex 1 Vessel Sharing Agreement, WSA Vessel Sharing Agreement and WSA 2 Vessel Sharing Agreement. The aggregate market share of Maersk Line and parties to ASPA Agreements in two-way routes of ordinary and refrigerated container transport markets is [70-75]% in terms of volume and carrying capacity. Market share of Alex 1 Vessel Sharing Agreement, WSA Vessel Sharing Agreement and WSA 2 Vessel Sharing Agreement was less than [20-30]%, behind Maersk Line and ASPA Agreements in terms of carrying capacity, volume and others; so it is difficult to form an effective competition constraint.
In Far East - South America East Coast route, in addition to Maersk Line and Asia 2 Agreement, Asia 1 Vessel Sharing Agreement, Mediterranean shipping and MOSK also provide container liner transportation services. The aggregate market share of Maersk Line and parties to Asia 2 Agreement in two-way routes of ordinary and refrigerated container transport markets is [40-45]% in terms of volume and carrying capacity. Market share of Asia 1 Vessel Sharing Agreement, Mediterranean shipping and MOSK was less than [20-30]%, behind Maersk Line and Asia 2 Agreement in terms of carrying capacity, volume and others; so it is difficult to form an effective competition constraint.
4. After the concentration, Maersk Line can exert influence on the decision-making and operations of ASPA Agreements and Asia 2 Agreement through Hamburg Südamerikanische.
After the concentration, Hamburg Südamerikanische is individually controlled by Maersk Line, which can coordinate with members to the above vessel sharing agreements via Hamburg Südamerikanische in terms of volume input, schedule, port and so on; and the degree of competition between each other will substantially weaken. The anti-monopoly investigation further shows that, in the vessel sharing agreements, the liner companies with larger volume will have greater voice in the decision-making of the vessel sharing agreement. Before the transaction, Hamburg Südamerikanische enjoys higher volumes in ASPA Agreements and Asia 2 Agreement, respectively [20-25]% and [40-45]%. After the concentration, Hamburg Südamerikanische's right to speak in the vessel sharing agreement further enhances. Maersk Line can exert influence on the decision-making and operations of ASPA Agreements and Asia 2 Agreement, and therefore is able to initiate or lead the coordination of eliminating and limiting competition.
(II) After the concentration, Maersk Line may improve price and conduct other acts of eliminating or limiting competition in the refrigerated container transport services in Far East - South America West Coast route.
1. Market share and market control.
The MOFCOM investigated the possibility of price improvement, competition elimination or limit by Maersk Line after the concentration. In the service market of the refrigerated container liner transportation in the Far East - South America West Coast route, the market share of Maersk Line is [25-30]% in terms of volume and that of Hamburg Südamerikanische is [15-20]%.After the concentration, the total market share is [45-50]%, and competitors Hapag-Lloyd (12.0%), CMA CGM (9.8%), Nippon Yusen (8.4%) have a large gap with Maersk line. The share of volume is an important index to reflect the market power of container liner transportation enterprises. After the concentration, Maersk Line will greatly improve the control force of the of refrigerated container transport services in Far East - South America West Coast route via volume integration.
2. This concentration will significantly increase the concentration of the market.
Before the concentration, Maersk Line and Hamburg Südamerikanische compete in this market. This transaction has reduced the number of competitors in the market, and the market concentration has increased significantly after the transaction. In terms of volume, the HHI before the concentration is 1604 and is 2652 after the concentration, belonging to a highly centralized market. The HHI was 1048, which shows that the concentration will significantly change the market structure, and the market strength of Maersk Line in the relevant market greatly enhanced.
3. Economic analysis shows that after the concentration, Maersk Line has the ability and motivation to implement unilateral price hikes.
Anti-monopoly investigation show that since 2017, in north route of the Far East - South America West Coast route, the average price of the refrigerated container liner transportation services provided by Maersk Line is [confidential information] USD/ TEU and [confidential information] USD/TEU by Hamburg Südamerikanische; the profit rate is more than [confidential information]%, much higher than that of general container transportation. Over the past five years, China's imports of fresh products (vegetables, seafood and meat) from South America's west coast have shown a rapid growth trend. In the refrigerated container transportation market in the Far East - South America West Coast, especially the North course, the demand for freight transport is larger and continues to grow.
According to GUPPI's quantitative assessment of the possibility of the price hike by Maersk Line after the concentration, it is likely that Maersk Line will further increase price in order to obtain high profits and it is difficult for other competitors to form an effective competition constraint. Merger and acquisition simulation also shows that, after the concentration, the markup by Maersk Line for the refrigerated container liner transportation services in that route may reach to more than 10% so as to eliminate or limit competition.
(III) In the short term, it is difficult to have effective competitors to the relevant market due to higher barrier.
Container liner transportation service is a capital-intensive industry, and there is a barrier to capital. At present, large-scale international container liner vessels have become a trend, and jumbo ships of more than 20 thousand standard container have become the mainstream ship type, and the cost is about USD 150-200 million. For container liner transportation service, higher temperature control technology is required in the transportation process, and higher capital and technical investment are needed. Container liner transportation service also has scale economy barriers, and the kind and quantity of routes are very important for soliciting customers. It is difficult for new market entrants to provide more routes and quantities in a short period of time, and it is difficult to obtain enough customers to achieve economies of scale.
After the concentration, Maersk Line has the ability and motivation to integrate the important resources of both sides in Far East and South America route in terms of type and quantity, capacity, sales channels and customer relationship, making other operators more difficult to enter the relevant market and therefore, in the short term, it is difficult to have new effective competitors to form valid competition constraint.
V. Discussion with additional restrictive conditions
In the course of review, the MOFCOM notified Maersk Line of the review opinion that the Case might eliminate and restrict competition, and held several rounds of negotiations with Maersk Line with respect to matters concerning how additional restrictive conditions may reduce the detrimental effects of this concentration of undertakings on market competition. With respect to the proposal on restrictive conditions submitted by Maersk Line, the MOFCOM mainly made evaluations in terms of the effectiveness, feasibility and timeliness in accordance with the Provisions on Additional Restrictive Conditions for the Concentration of Undertakings (Trial for Implementation).
Upon evaluation, the MOFCOM believes that the proposal on additional restrictive conditions submitted by Maersk Line to the MOFCOM on November 2, 2017 can reduce the adverse effects of the concentration of undertakings on market competition.
VI. Decisions
Given that the concentration of the operators may exclude and restrict the competition effect of the general container transport market and the refrigerated container transport market of the Far East - South America West Coast route, the Far East - South America East Coast route, according to the proposal on additional restrictive conditions submitted by Maersk Line to the MOFCOM, the MOFCOM has decided to approve the concentration with the additional restrictive conditions, and requires Maersk Line to perform the following obligations:
(1) Hamburg Südamerikanische will not join after the expiration of ASPA Agreements in the Far East - South America West Coast route;
(2) Hamburg Südamerikanische will withdraw from Asia 2 Agreement in the Far East - South America East Coast route;
(3) Maersk Line and Hamburg Südamerikanische may not reach vessel sharing agreements or join in shipping alliance with main competitors within five years in Far East - South America East Coast route and the Far East - South America West Coast route;
(4) Maersk Line reduced the volume of refrigerated container transport in Far East - South America West Coast route, making the market share of its volume to [34-39]%;and within three years after the delivery of the transaction, the market share of the refrigerated container transportation in Far East - South America West Coast route in terms of volume sit within [34-39]%.
Besides the supervision and execution of such restrictive conditions subject to the Announcement, the final proposal on additional restrictive conditions submitted by Maersk Line to the MOFCOM on November 2, 2017 shall be legally binding upon Maersk Line.
The MOFCOM has the power to supervise Maersk Line on its own or through a supervision trustee concerning the fulfillment of the above obligations. Where Maersk Line fails to fulfill the above obligations, the MOFCOM will handle the matter according to the Anti-monopoly Law.
The Decisions shall come into force as of the date of announcement.
Ministry of Commerce of the People’s Republic of China
November 7, 2017
(All information published in this website is authentic in Chinese. English is provided for reference only. )
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