China International Marine Containers Group abandons its planned acquisition of Maersk Container Industry following concerns expressed by the Bundeskartellamt

The parties have withdrawn the notification of the planned acquisition of Maersk Container Industry (MCI) based in Tinglev, Denmark, and Qingdao, China, by China International Marine Containers (Group) Co. Ltd. (CIMC) based in Shenzhen, China. After intensive and worldwide investigations, the Bundeskartellamt had provided the companies with a detailed explanation of its considerable competition concerns about the concentration. Both companies are active in the manufacture of shipping containers.

The target companies belong to the container shipping company Maersk and specialise in the manufacture of reefer containers (also referred to as reefers), reefer boxes and reefer units. They sell their products under the “Star Cool” brand worldwide. Whereas MCI’s production section is based in China, its research and development and other facilities are based in Denmark.
CIMC also produces and sells reefer boxes worldwide, besides other types of containers (dry cargo, tank and special containers). Reefer boxes can be used as reefers with reefer units made by other manufacturers.

Andreas Mundt, President of the Bundeskartellamt: “The companies are active in a very narrowly defined market environment. Both reefer boxes and reefer units are only manufactured by four companies worldwide. For years CIMC has been by far the leading supplier of reefer boxes on this market worth billions. By taking over MCI, CIMC would have expanded its already strong position, reaching a worldwide market share of 60 to 70 per cent, and it would have supplemented its portfolio with reefer units for reefer boxes. After the takeover their customers, for example container ship operators, would not have had sufficient alternatives to choose from. MCI would have ceased to be an important alternative supplier. During the proceeding we cooperated with the US Department of Justice, where the merger had also been notified.”

According to the Bundeskartellamt’s preliminary assessment, the two remaining competitors would not have been able to sufficiently compensate the deterioration of the competitive situation caused by the takeover and exert effective competitive pressure on CIMC. Guangdong Fuwa Engineering Group Co., Ltd. is another Chinese supplier, but its market position is minor and its production capacities are relatively low. The fourth supplier is the Chinese company Shanghai Universal Logistics Equipment Co., Ltd. (known in the market as DongFang) which belongs to the Chinese state-owned shipping company COSCO Group. Customers active in container shipping would become dependent on a strong competitor which is active in many downstream business levels when procuring from DongFang. What is more, the two Chinese companies CIMC and COSCO had been linked under corporate law and in terms of personnel for several decades until the very recent past, meaning that effective competition does not necessarily exist between these two companies.

Market entry by new suppliers would not have been likely in the forecast period: Manufacturers of reefer boxes have to provide high production capacities at all times, because their customers’ demand (container shipping companies and container leasing companies) strongly fluctuates over time and is marked by high order volumes over a relatively short time. At the same time, profitability is subject to large sales volumes.

In the course of the proceeding the parties made several suggestions for structural changes to the merger project in an effort to achieve clearance subject to remedies. However, from the Bundeskartellamt’s point of view, these changes would not have been sufficient to eliminate its competition law concerns.
The Bundeskartellamt examined the project in cooperation with the US Department of Justice where the project had also been notified for examination under merger control. This notification has now also been withdrawn.

The Bundeskartellamt will publish a detailed case summary on the proceeding soon.