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Saturday, December 14, 2019

Maritime Logistics Professional

What's sauce for the goose ...

Posted to Martin Rushmere (by on November 29, 2013

The ILA pontificates about market dictation over the P3 alliance

It was chuckles all round in the executive suites of Maersk, CMA and MSC this week. The cause was the assertion , “the P3 agreement represents an attempt by three of the largest carriers in the industry to dictate the market place,” from none other than that great supporter of international shipping lines, Harold Daggett, president of the International Longshoremen’s Association.

The ILA and its West Coast twin, the ILWU, are seen as the grossest exponents of dictating the market place. They dictate to the shipping lines and the terminal operators just who will work on each ship at berth, how much each worker will be paid and how many will be working.

As others have pointed out, Mr. Daggett is worried that the six-year contract with employers is threatened, because the P3 might undercut smaller rivals on rates and force them out of business. The ILA is actually fearful that the P3 will end up being the only service on its routes, making it a hugely powerful bargaining adversary for the next contract.

This is monsters-under-the-bed reasoning and is never likely to happen. By that logic, because Maersk is reducing costs so much better than anyone else, it will force out the other two and become the only carrier on those routes.

But the Global Shippers Forum has joined in the criticism, strongly implying that it is skeptical about the three carriers continuing with independent pricing, given that a joint London Network Centre is being established. “The more the costs are common, the greater the need for the P3 partners to demonstrate how they are going to compete on price," it says in a letter to the Federal maritime Commission. 

“The key question is; are the P3 carriers able to demonstrate that the items that they refer to in the FMC filing: sales and Marketing, EDI, back office, paperwork and customs, sufficiently significant to allow competitive pricing?” 

At the same time, the forum is facing something of a dilemma because NITLeague in the US is one of its members and sometimes takes a different view to Europe about business groupings and associations. Also, there is some awkwardness, verging on embarrassment, about being seen as agreeing with union labor.

Hence the forum takes a milder line than the ILA and asks the FMC to put the alliance under “very careful scrutiny”.

The FMC is likely to make a decision within the next 10 days.