Against the backdrop of the difficult security situation in the Black Sea, Ukraine is trying to revive the interest of global container lines in its ports. However, the Antimonopoly Committee of Ukraine (AMCU) has suddenly reproached the Mediterranean Shipping Company (MSC), the largest of these container lines. What is the logic behind this move?
In early September, Germany is expected to make a final decision on the acquisition of a stake in the Port of Hamburg by MSC, which is owned by the Italian family Aponte. In July, Hamburg's parliament voted to approve the acquisition of a stake in port operator Hamburger Hafen und Logistik AG (HHLA) by MSC, the world's largest container line. The industry is now awaiting the outcome of the second reading of the agreement between the city and MSC.
MSC announced its intention to acquire 49.9% of HHLA long ago. Almost a year ago, the company signed a binding preliminary agreement with the Hanseatic city to establish a strategic partnership. The city, represented by Hamburger Gesellschaft für Vermögens- und Beteiligungsmanagement mbH (HGV), will retain a 50.1% stake.
Previously, HHLA was wholly owned by the Free Hanseatic City of Hamburg. Since 2007, however, HHLA has been publicly traded, with approximately 30% of its shares available on the open market. MSC has already acquired most of these shares at EUR 16.75 per share.
The forty-year agreement is still the subject of debate in Germany and abroad. In particular, some politicians and experts are concerned that the value of the agreement is understated and that it could be considered a form of state aid. Port workers and unions see it as a threat to their rights.
Recently, the Antimonopoly Committee of Ukraine suddenly expressed concern that "under certain conditions" the deal could lead to "monopolization of the container cargo handling market in the port of Odesa." HHLA has operated Container Terminal Odesa (CTO) since 2001.
By selling HHLA's stake to the Mediterranean Shipping Company, Hamburg hopes to increase cargo handling volumes. Cargo handling volumes fell by 4.7% to 114.3 million tons last year, compared to 2022. This is the lowest figure since 2009. MSC has promised that there will be an improvement next year and that cargo handling volumes will reach 1 million TEUs per year by 2031.
In addition, the company plans to increase the number of jobs and has committed, in an additional agreement, not to lay off any workers for production-related reasons for five years and to maintain the right of workers to participate in decision-making. MSC also intends to establish its German headquarters in Hamburg and to base its cruise operations there. In addition, HHLA is to receive EUR 450 million for additional investments. In short, everything looks very promising.
HHLA currently operates three of the four container terminals at the Port of Hamburg, the third-largest container port in Europe after Rotterdam and Antwerp. The HHLA stake is expected to become another asset for MSC, which already owns 70 terminals and 760 container ships.
Ukrainian interest
However, the Antimonopoly Committee of Ukraine sees grounds to block the share acquisition due to the threat of monopolization of container handling in the port of Odesa. Therefore, it has announced the launch of an "in-depth investigation into the state of competition and an analysis of the impact of the concentration on Ukrainian commodity markets."
The AMCU has begun considering the case "on concerted actions directly related to the implementation of these concentrations" and has undertaken to examine two specific concentrations under this agreement. The first is the acquisition of control of HHLA by SAS Shipping Agencies Services S.à r.l (a subsidiary of MSC) and HGV. The second is the acquisition of control of Port of Hamburg Beteiligungsgesellschaft SE (a subsidiary of MSC) by SAS Shipping Agencies Services and HGV.
Why has the AMCU suddenly become so interested in these German deals and will the Ukrainian antitrust investigation have any impact on the agreement between MSC, HHLA, and Hamburg?
The Ukrainian anti-monopoly authorities cannot directly influence an agreement concluded in Germany, the Interlegal law firm said in comments to the CFTS portal.
"The primary powers of the AMCU include, among other things, the monitoring of market concentration: the AMCU has the authority to grant approvals for concentrations, such as mergers and acquisitions, provided that they do not lead to market monopolization or significant restriction of competition. The committee can make decisions regarding the Ukrainian subsidiary of HHLA. In the future, it can demand the sale of part of its shares on the market or impose fines," the law firm said.
The question is why the Antimonopoly Committee of Ukraine decided to delve into this issue now, given that a final decision on the agreement in Germany has yet to be made, and there has yet to be an impact on the Ukrainian market.
"Obtaining a merger clearance in Ukraine involves several steps. Companies planning mergers or acquisitions must submit applications to the AMCU with detailed information about the transaction and its participants. The AMCU analyzes this information, assesses the impact of the transaction on the market and competition, and then decides whether to approve or deny the application. If the transaction could lead to monopolization or significant restriction of competition, approval may be denied," says Dmytro Ochkolias, an attorney at Interlegal. However, no market concentration is occurring in Ukraine itself.
"In this situation, we do not understand what assets were the subject of the transaction between the two companies, what level of control was changed, and in what corporate positions they were changed, or if they were even changed. Therefore, it would be premature to make any predictions about the outcome of such AMCU proceedings," says Ochkolias, emphasizing the need for due diligence of all risks before making any legally significant decisions.
Indeed, it is not yet clear what exactly the AMCU is looking for. Apparently, there is concern that the owner of a major terminal in Odessa could be a company that also operates a large fleet and runs container shipping lines.
It should be noted that MSC has resumed container ship calls to Ukrainian ports and that the company has decided to launch a regular feeder service connecting the Turkish port of Tekirdağ with Odesa (operating specifically at CTO). Notably, MSC was the first international container line to send a vessel to Odesa after Russia launched its full-scale invasion of Ukraine. However, it is important to note that the path to this Ukrainian port was not without its challenges: MSC initially canceled its first call to Odesa because of a misunderstanding with the Ukrainian customs authorities.
Speaking of the company itself, before Russia's full-scale invasion of Ukraine, MSC's fleet called at the ports of Odesa and Chornomorsk, offering two feeder services. MSC's share of the Ukrainian container handling market was approximately 15%. Despite this market share, MSC ranked second among international container lines in terms of container turnover in Ukrainian seaports, behind Danish shipping and logistics company Maersk.
As for CTO, the terminal handled the largest volume of containers among Ukrainian container terminals before the full-scale war, commanding a market share of 35-40%. The terminal, with a capacity of 850,000 TEU, increased its container turnover by 5.1% to 390,808 TEU in 2021, compared with 2020 (the turnover of Ukrainian seaports in that year was 1.022 million TEU).
A market share of at least 35% is sufficient to establish a monopoly. Therefore, based on these pre-war indicators, CTO could be considered a monopolist. But that is if we focus on these figures. However, these figures are no longer relevant in the current situation. Market participants now emphasize the importance of celebrating the resumption of container handling in Ukrainian ports.
"An analysis of this agreement may indicate not only the monopolistic tendencies that are the subject of AMCU's investigation. It is also worth considering another aspect of the situation - the fact that MSC's actions demonstrate an interest in working in the Odesa region not as a one-off initiative, but with a long-term perspective, given that we are talking about one of MSC's key assets. In the context of the revival of the Ukrainian container shipping market, MSC was the first carrier to enter the port of Odesa after a long hiatus, thereby demonstrating its leadership in the market," said Volodymyr Huz, commercial director of Global Ocean Link, said in comments to the CFTS portal.
"It can be concluded that this giant company believes in the victory of Ukraine and the independent development of our economy, and seeks to strengthen and capitalize on these prospects. Otherwise, the actions and decisions of MSC’s management would have been one-off. Instead, we see a clear strategy. With well-established communication between all market participants and the AMCU as one of the regulators, the prospects could be quite positive," Huz said.
Container Terminal Odesa
All the lines that operated in Odesa before the war did so through CTO. Now, MSC operates through CTO while CMA, Maersk, Akkon, and HPL use the Chornomorsk seaport. As a result, MSC will have its own terminal through which all other container lines will call and purchase its services.
"Will this situation lead to a monopoly? Only time will tell. Some market participants are wary of this possibility, while others see potential in the fact that powerful companies are engaging with Ukraine, recognizing the potential of the Ukrainian port industry, and not shying away from war-related risks. This gives us some hope," says Dmytro Kazanin, director and owner of the transport and logistics company TEUS. "Therefore, one can only assume at this point that MSC, with strategic plans for successful and long-term operations in Ukraine, has taken these factors into account and will conduct its operations in a way that benefits everyone and ensures compliance with antitrust laws."
Viktor Berestenko, president of the Association of International Freight Forwarders of Ukraine (AIFFU), also believes it is too early to talk about a monopoly threat. "The current situation in the Ukrainian container market is completely different from what it was before the war. This has to be understood. Therefore, such statements by the Antimonopoly Committee seem inappropriate, especially given that the preliminary agreement between MSC and Hamburg was known much earlier. So, why start analyzing it now? From the outside, this may even look like the state authorities' reaction to the previous scandal, when MSC postponed its entry into a Ukrainian port because of excessive customs delays," he says.
"It is reasonable to assume that MSC’s container ships will call exclusively at CTO in the future because MSC will own CTO. However, this is a market, and we periodically observe container lines changing terminals. We should remember that Maersk once left Chornomorsk and moved to Pivdennyi," Berestenko adds.
"However, MSC is not trying to take over the entire supply chain; that is not its approach. To a greater extent, it is still focused on building good relationships with forwarders. This is important because, for example, our association has received complaints from forwarders that a local container line does not allow any 'foreign' forwarders to operate and that everything must go exclusively through it. It is not a monopoly, but its actions clearly restrict competition. I do not expect MSC to behave similarly, nor do I expect it to have a negative impact on the Ukrainian market. I hope for better service," he says.
Following in the footsteps of a giant
In reality, it is difficult to predict how MSC will behave in the Ukrainian market once it becomes the new owner of CTO. The giant clearly has ambitions, and the global media are paying attention to its moves in various regions.
For example, the French newspaper Le Monde reported that by controlling two container terminals on the coast of Côte d'Ivoire, MSC has "gained a monopoly on containers in this key West African country." It refers to the port of Abidjan, "the country's bustling economic capital serving part of the landlocked Sahel region," and the port of San Pedro, "the world's leading exporter of cocoa."
In Australia, the shipping industry has been actively debating national antitrust legislation over the past year. Specifically, the Australian Competition and Consumer Commission stated that the law "allows shipping lines to collaborate on prices, capacity, and schedules," which could lead to abuses. It called for expanded powers to tackle collusion and "encourage greater competition among shipping companies on trade routes." The debate was sparked by a vessel-sharing agreement between MSC and the Israel-based ZIM Integrated Shipping Services, which has limited the number of container ships to Australia.
Returning to the Ukrainian container market, however, we repeat that it is too early to predict MSC's future impact on the sector. Undoubtedly, MSC's actions cannot but be of interest to competitors in this market, and they are certainly closely monitoring the development of events. Antitrust scrutiny is inevitable, but as the container market gradually recovers, it needs positive signals rather than warning shots.
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When preparing this article, the CFTS portal contacted the AMCU for comment. We received the AMCU's response after the article was published, but the response was not specific. The AMCU noted that the review of market concentration cases is ongoing.
The AMCU also stated that "the concentration cases were initiated in order to examine the market of container cargo handling in the port of Odesa, as market concentrations could, under certain conditions, lead to the monopolization of this market, which would justify the prohibition of such concentrations."
According to the head of the AMCU, no additional information can be disclosed or made public.
