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August 13, 2020

Hong Kong Competition Commission investigates port operator alliance

The Competition Commission of Hong Kong has started a consultation on commitments offered by the Hong Kong Seaport Alliance under section 60 of the Competition Ordinance.

The Competition Commission of Hong Kong has started a consultation on commitments offered by the Hong Kong Seaport Alliance under section 60 of the Competition Ordinance.

The commission carried out a probe into the alliance to determine if it will violate the First Conduct Rule of the Ordinance by harming Hong Kong competition.

The alliance is a joint venture that was formed by four Hong Kong container terminal operators, Hongkong International Terminals, Modern Terminals, COSCO-HIT Terminals (Hong Kong) and Asia Container Terminals.

According to the alliance, the parties will jointly operate and manage their 23 berths in eight terminals at Hong Kong’s Kwai Tsing port via operational, commercial and financial coordination.

The fifth port operator in Kwai Tsing is Goodman DP World Hong Kong (DP World), which is not a part of the alliance.

The Committee assessed whether the alliance has anti-competitive effects in the three main markets, International Transshipment market, the Barge Transshipment market, and the Gateway market, where the parties provide port terminal services.

It also investigated the effects on other relevant markets.

According to the investigation, the commission said that the alliance will not raise competition concerns in the International Transshipment and Barge Transshipment markets as there are many service providers for shipping line customers.

However, it said that the alliance may lead to competition concerns at Gateway market as the parties of the alliance have a high market share.

Due to this, the parties might increase charges and reduce service levels, which will negatively impact customers.

Additionally, the commission said that the alliance might also raise competition concerns related to the provision of different services at Kwai Tsing to customers and the reciprocal overflow services provided to DP World.

In response to the concerns, the alliance plans to set up proposed solutions, which will lead to an even playing field at the markets in the next eight years.

The alliance has proposed to cap the service charges to shipping lines, offer a minimum service level to Kwai Tsing for gate access and uphold reciprocal overflow arrangements with DP World.

The commission will appoint an independent Monitoring Trustee to oversee the compliance of the commitments.

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