The U.S. Federal Maritime Commission (FMC) announced on Friday, July 12, that it is deferring its review and approval of the proposed Gemini Cooperation between Maersk and Hapag-Lloyd. While the commission has stated that it needs additional information regarding the “potential competitive impacts of the arrangement,” both Maersk and Hapag-Lloyd have indicated that this request is “fairly standard” from the FMC. They noted that the cooperation is not slated to begin until February 2025.
“The Commission has determined that the Gemini Cooperative Agreement as submitted lacks sufficient detail to allow for a complete analysis of its potential competitive impacts,” the FMC declared in its statement. The commission is invoking its Request for Additional Information, which defers the approval that would have otherwise occurred 45 days after the filing. The FMC will also conduct a 15-day public comment period and await a revised filing addressing the specific points raised.
Maersk and Hapag-Lloyd, the second and fifth largest container carriers by capacity respectively, announced in January their intention to launch the new cooperation, which is poised to significantly alter the dynamics of industry alliances. Maersk had previously announced that its cooperation agreement with MSC Mediterranean Shipping Company, known as 2M, would end, while Hapag-Lloyd is set to withdraw from THE Alliance by the end of January 2025.
The two companies plan to pool around 290 vessels with a combined capacity of 3.4 million TEU. Maersk will contribute 60 percent of the combined capacity, with Hapag-Lloyd contributing the remaining 40 percent. They claim that this partnership will enhance schedule reliability, targeting a 90 percent reliability rate, improve transit times on major port-to-port corridors, and offer better access to some of the world’s most well-connected ocean hubs.
Regulators Seek More Information on Potential Market Impacts
Cooperation agreements among carriers became a contentious issue during the pandemic, leading to increased scrutiny of business practices in the U.S. and other regions. Critics argue that industry consolidation has resulted in over 80 percent of capacity being controlled by a handful of carriers, potentially reducing competition. However, the World Shipping Council, representing the interests of its member carriers, argued that such agreements allow for better access by sharing capacity and routes while ensuring carriers remain competitive in pricing and negotiating freight contracts.
“We do not anticipate any impact on the Gemini network and look forward to continuing to work with the FMC,” Maersk and Hapag-Lloyd told The Maritime Executive following the FMC’s announcement.
The FMC notes that the agreement would permit Maersk and Hapag-Lloyd to share vessels on routes between the United States and Asia, the Middle East, and Europe. The companies submitted their filing to the FMC on May 31, 2024. The application would have become effective on July 15, had the FMC not initiated the request for additional details.
“Reconsideration of the agreement will not commence until the commission has received a fully compliant response to its inquiry,” the FMC stated in the announcement. Once the response is deemed complete, the FMC will have an additional 45 days to review the filing before it can take effect.
This decision underscores the heightened regulatory scrutiny that shipping alliances face in the current market environment. The FMC’s demand for further information reflects concerns about ensuring that such large-scale cooperations do not undermine competition or negatively impact the market. As the industry continues to evolve, the outcomes of these reviews could set important precedents for future alliances and cooperative agreements in maritime logistics.
The deferral highlights the balance regulators must strike between allowing cooperative efficiencies and preventing anti-competitive practices. As Maersk and Hapag-Lloyd prepare to respond to the FMC’s detailed inquiries, the industry will be watching closely to see how this significant alliance progresses and whether it can proceed without causing undue market disruption.
