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Chinese competition authority blocks P3

network
The Chinese Ministry of Commerce (MOFCOM) has blocked the contemplated P3
Network, a container shipping alliance between MSC, Maersk, and CMA CGM. The
parties immediately abandoned their plan for the proposed alliance. The decision
comes after US and European competition authorities had already approved the
agreement, and shows that MOFCOM determines its own course. Transactions
that require MOFCOM approval must therefore be managed carefully.

Since the introduction of the merger notification procedure in China in 2008, MOFCOM has
reviewed approximately 800 transactions. It has imposed restrictive conditions in 23 cases
and, before its decision on the P3 Network, had rejected only one transaction (Coca Colas
contemplated acquisition of the Chinese juice maker Huiyuan, in 2009).

In its decision dated 17 June, MOFCOM states that it blocked the creation of the P3 Network
because the parties had not provided sufficient evidence that the benefits of the P3
Network would outweigh its harm to competition. The decision notes that the proposed
alliance would result in a combined market share of about 47% and would greatly increase
market concentration in the sea route between Asia and Europe. MOFCOM seems to treat
the alliance between the three parties as a full merger, whereas the parties envisaged an
operational rather than a commercial cooperation.

The MOFCOM decision was published on the very last day of a lengthy review process. The
parties announced the proposed P3 Network on 18 June 2013. The parties submitted their
draft MOFCOM notification on 18 September 2013. MOFCOM formally accepted the
submission on 19 December 2013, and subsequently took it to an extended Phase II review.
Meanwhile, the P3 Network was cleared without any restrictions by the US Federal Maritime
Commission on 24 March 2014 and by the European Commission on 3 June 2014.

The MOFCOM decision shows once more that transactions that require MOFCOM approval
must be managed carefully. Parties should engage advisors to assess any issues as early as
possible and should prepare for a review process that involves significant time and effort.

De Brauw Blackstone Westbroek -1/1- 09.07.2014