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4 THE JOURNAL OF COMMERCE Editor's Letter ©2014 The Journal of Commerce — All Rights Reserved For more information, visit our Web site, EXECUTIVE EDITOR Chris Brooks 973.776.7818 MANAGING EDITOR Barbara Wyker 973.776.7817 SENIOR EDITORS Joseph Bonney, Finance and Economics 973.776.7809 William B. Cassidy, Trucking and Domestic Transportation 202.499.2285 Bill Mongelluzzo, Trans-Pacific 562.428.5999 Mark Szakonyi, Rail/Intermodal, Regulation, Policy 202.499.2295 Greg Knowler, Asia +852 3975.2647 SENIOR EDITOR, DIGITAL Harry G. Butler, 609.433.7215, EDITOR-AT-LARGE Peter T. Leach, Trans-Atlantic 212.755.0940 RESEARCH EDITOR Marsha Salisbury 973.776.7828 ECONOMIST Mario O. Moreno 973.776.7850 SPECIAL PROJECTS EDITOR Alessandra Gregory Barrett 973.776.7808 SPECIAL PROJECTS EDITOR, ASIA Annie Zhu +86 (21) 60396986 SENIOR DESIGNER Sue Abt, 973.776.7825, DESIGNER Bryan Boyd, 973.776.7827, WEB PRODUCER David Pulis, 973.776.7807, ASSOCIATE WEB EDITOR Grace M. Lavigne, 973.776.8506, ASSOCIATE WEB EDITOR Corianne Egan, 862.368.4054, PUBLISHER Tony Stein Georgia and Asia sales, 678.456.8530 SALES Cindy Cronin, Senior Account Manager Pacific Northwest, Midwest, Gulf, Canada sales, 954.551.8305 Zachary Gorman, Account Executive Northeast sales, Classifieds/Reprints/Copyrights 973.776.7820 Ria Van den Bogaert, Account Executive Europe, Middle East and Africa sales, +32 2 569 8905 For Magazine Subscription Customer Service: Domestic (Toll-Free): 877.675.4761 International: 847.763.4932 E-mail: 2 Penn Plaza East, 12th Floor, Newark, N.J. 07105 973.776.8660 • 800.952.3839 CHIEF EXECUTIVE OFFICER, Gavin Carter CHIEF OPERATING OFFICER, Rhiannon James EXECUTIVE VICE PRESIDENT/CHIEF CONTENT OFFICER, Peter Tirschwell CHIEF FINANCIAL OFFICER, Ian Blackman VP, PUBLICATIONS, Amy Middlebrook VP, HUMAN RESOURCES, Cindy Mevorah GENERAL MANAGER, Julia Murphy DIRECTOR, PRODUCTION, Carmen Verenna SENIOR MARKETING MANAGER, Jesse Case Chris Brooks The Journal of Commerce (USPS 279 – 060), ISSN 1530-7557,July 7, 2014, Volume 15, Issue No. 14. The Journal of Commerce is published bi-weekly except the last week in December (printed 26 times per year) by JOC Group Inc. 2 Penn Plaza East, 12th Floor, Newark, N.J. 07105. Subscription price: $344 a year. Periodicals postage paid at Newark, N.J., and additional mailing offices. © All rights reserved. No portion of this publication may be copied or reprinted without written permission from the publisher. POSTMASTER: Please send address changes to The Journal of Commerce, Subscription Services Department, P.O. Box 1059, Skokie, IL 60076-8059. IN THE END, does the "why" really matter? After 12 months of planning and countless millions of dollars, isn't it enough that China said no to the largest vessel-sharing alliance ever proposed? Well, yes, the reasons behind the failed partnership of Maersk Line, CMA CGM and Mediterra - nean Shipping Co. do indeed matter. Unfortunately, we may never know the true reasons behind China's rejection after the three carriers tried in various ways to meet the country's conditions, according to a report by the global law firm of Skad- den, Arps, Slate, Meagher & Flom. On its face, of course, the carriers' share of the Asia-Europe trade — 42 percent, according to the U.S. Federal Maritime Commission, and 47 percent, according to China's Ministry of Commerce — would be enough to void the deal, considering the most common threshold for domi- nant market control is 30 percent. But there's been enough chatter — some linked directly to the P3 car- riers' themselves — that the lack of a Chinese carrier in the alliance was the real deal-killer. Some have gone as far to say that such a demand was made. Or, if you believe others, it was the centralized command center to be run by former Maersk executive Lars Mikael Jensen that ran afoul of Chinese regulators (though one would think, if true, that could have been rectified by the carriers. That it wasn't — and that the P3 carri- ers quickly squashed the P3 after China's decision — only raises more questions about the carriers' true commitment to the alliance.). And, if you believe Richard Gluck, an attorney with Garvey Schubert Barer in Washington who chairs its Transportation and Logistics and China Task Force practice groups, it was more about the impact on rates out of China and the broader eco- nomic impact. The reasoning behind the latter two possibilities, however, belies a simple fact: Regulatory efforts don't die with approval of a partnership. Regulatory agencies in Europe, the U.S., Japan and numerous other coun- tries have been anything but passive toward carriers of all sorts accused of breaching antitrust law. In allowing the P3, in fact, the Eur- opean Commission warned the car- riers that it would respond to any com- plaints of anti-competitive behavior. Sure, you say, but the three P3 carriers are European and thus were in line for beneficial treatment by EU antitrust authorities. Valid point, but mis- guided. The European Commission is eight months into an investigation of Asia-Europe carriers — including Maersk and CMA CGM — over alleged coordination of rate increases and has been an aggressive antitrust officer for the better part of two decades. Is China as harsh on its own? Tough to say, but an argument can be made that it isn't. The CKYHE Alliance among China Ocean Ship - ping Co., Japan's "K" Line, Taiwan's Yang Ming and Evergreen and South Korea's Hanjin Shipping, after all, con- trols 32 percent of the trans-Pacific trade — above that 30 percent thresh- old that commonly indicates market dominance, according to research analyst Alphaliner. The P3 would have controlled 22 percent of that market. So why does the true reason for China's decision to stonewall the P3 matter? Because as with any strate- gic move, lack of visibility leads to guesswork. Ocean carriers, in par- ticular, can't afford guesswork after collectively losing billions of dollars in four of the last five years. For some, their decisions could be the difference between surviving or not. Maersk, CMA CGM and MSC have such finan- cial heft that they can withstand the rejection of a plan a year in the mak- ing and worth millions of dollars. It's a luxury not everyone can afford. JOC JULY 7.2014 Picking Up the P3 Pieces

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