European Commission approves Hapag Lloyd-UASC deal

European Commission approves Hapag Lloyd-UASC deal
The Commission was notified of the transaction on October 3, 2016

The European Commission (EC) has approved the proposed acquisition of the United Arab Shipping Company (UASC) by the German Hapag-Lloyd.

The acquisition’s clearance is conditional on the withdrawal of UASC from the NEU1 consortium on the trade routes between Northern Europe and North America.

Hapag-Lloyd offered the termination of UASC’s participation in the consortium to address the EC’s concerns that the merged entity would have faced insufficient competitive constraint on those routes.

According to the EC, the withdrawal will completely remove the additional link between Hapag-Lloyd’s and UASC’s consortia which the deal would have created on the Northern Europe-North America trade routes.

As the EC said, following compliance with the commitments, the merged company’s position on these trade routes will be comparable to that currently held by the German shipping company.

According to the commission, while UASC will continue to operate as part of the NEU1 consortium during the notice period to “guarantee an orderly exit”, a monitoring trustee will ensure that no anti-competitive information is shared between the consortium and the merged company during the period.

A statement by the EC noted: “The Commission found that the merger, as initially notified, would have created links on the Northern Europe-North America trade routes between the consortia and alliances in which Hapag-Lloyd is a member and the NEU1 (ex-Pendulum) consortium, in which UASC is a member.”

“As a result, through the consortia and alliances it would belong to, the merged entity could have influenced capacity and prices on a very large part of those markets, to the detriment of customers and, ultimately, consumers,” the statement added.

“The Commission had concerns that on those routes, the merged entity would have faced insufficient competitive constraint from rival companies.”

On the trade routes of Northern Europe and North America, Hapag-Lloyd is a member to the G6 Alliance, which also includes Nippon Yusen Kaisha (NYK), Orient Overseas Container Line (OOCL), Neptune Orient Lines (/NOL), Hyundai Merchant Marine (HMM) and Mitsui OSK Lines (MOL).

On the same routes, the company is also part of the SLCS, consortium together with OOCL, and the SLCS-MSC consortium, together with OOCL and the Mediterranean Shipping Company (MSC).

On these routes, UASC is a member of the NEU1 consortium, which also includes CMA CGM and Hamburg Süd.

Additionally, in 2017 Hapag-Lloyd and UASC are expected to join “The Alliance”, which will also operate on the Northern Europe – North America trade routes.

Commissioner Margrethe Vestager, who is in charge of competition policy, said: “European companies rely on container liner shipping services for their transatlantic shipments. It is very important that the markets remain open. The commitments offered by Hapag-Lloyd ensure that the takeover will not lead to price increases on the routes between Northern Europe and North America.”