Bill calls for end to liner antitrust immunity

Bill calls for end to liner antitrust immunity    Reps. James L. Oberstar, D-Minn., Rep. Elijah Cummings, D-Md., have introduced a bill, (H.R. 6167, the Shipping Act of 2010), that would eliminate antitrust immunity for ocean carrier agreements.

Oberstar

   Oberstar pointed to complaints from importers and exporters earlier this year about obtaining adequate capacity and sharp rate increases and said in floor remarks that 'eliminating the antitrust immunity for these conference agreements will increase competition by requiring ocean carriers to compete in the marketplace with the best price and service to get shippers' business. That will benefit industry as a whole.'
   The Committee on Transportation and Infrastructure chairman said the bill is a pro-competitive measure that would 'facilitate U.S. imports and exports. In 2007, the European Union eliminated the antitrust immunity that ocean carrier had from their laws. I am not aware of any ocean carriers being put out of business because of the loss of that exemption.'
   But the World Shipping Council, which represents most major liner-shipping companies, said in a statement, 'Capacity shortages in late 2009 and early 2010 were brief, market-driven and unforeseen by shippers and carriers,' and that 'the proposed legislation would not and could not prevent difficulties if such extreme economic conditions recur in the future.'
   WSC argued, 'the existing regulatory structure did not cause these transitory problems, but it did provide a predictable base from which carriers could efficiently and quickly respond to improved market conditions.'

Cummings

   Oberstar said his bill would require carriers to continue to file service contracts with the Federal Maritime Commission 'and to have tariffs be available for FMC review. This information will allow the FMC to determine whether or not carriers are colluding after their antitrust immunity has been eliminated.'
   Oberstar said carriers would be allowed to continue to operate vessel sharing agreements, though Oberstar said such authority is limited 'so that it ensures that there is still adequate competition in a particular trade. The European Union limits a vessel sharing agreement to 30 percent of the capacity in a trade. That is a reasonable place to begin.'
   But the WSC raised a caution, saying the bill as written 'would effectively destroy the current system of operating agreements serving American maritime foreign commerce. It would be both procedurally and substantively far more restrictive than the application of antitrust law, and would be wholly out of alignment with every other nations' treatment of such agreements. Impairing carrier operating agreements is not an agenda that has been advocated by shippers, nor is it supported by any findings or recommendations from the FMC ' If enacted, the bill would create an ocean transportation system that would make U.S. trades less efficient and more costly for carriers, resulting in less choice, less capacity, lower service quality, and higher costs for U.S. exporters and importers.'
   Other aspects of the bill highlighted by Oberstar include:
   ' Carriers' practice of imposing surcharges, 'seemingly at will,' would need to 'accurately reflect increases in the carrier's cost.'
   ' Empowers the FMC 'to help resolve service contract disputes quickly through mediation and arbitration, so that the freight can keep moving.'
   ' Prohibits carriers from discriminating against a shipper that provides its own container or other equipment.
   ' Addresses the practice of bumping or rolling containers. The bill would prohibit ocean carriers from 'engaging in deceptive practices, including the unreasonable failure to provide transportation services as agreed to in a negotiated service contract.' The FMC would develop remedies and penalties for carriers that engage in deceptive practices.
   The World Shipping Council said it expected introduction of the bill to be 'a first step in what we expect will be a legislative review process that appears likely to extend into the next Congress.'
   It cautioned against ending rate discussion agreements, saying carriers expected 'repeal of rate discussion authority would lead to greater rate volatility and less predictable and less stable markets. We do not recommend this change. Greater rate instability is unlikely to be in the interests of shippers or in the interests of carriers that must continue to make billions of dollars of investment in the capacity needed to serve American commerce efficiently.'
   It said the bill would result in excessive government regulation, proposing 'various forms of rate regulation, mandatory revenue transfers, intrusion into how parties agree to structure their commercial offerings and agreements, and burdensome and ill-defined reporting requirements.
   'If the Congress is to undertake a review of the Shipping Act and consider whether and how to design a different regulatory system for America's international maritime commerce, the liner shipping industry is prepared to discuss the issues, and the best way to address them with shippers, ports, labor and the Congress,' WSC said. 'Such a discussion should be a transparent, open and careful process. The objective should be an efficient liner shipping transportation system for international commerce, in which carriers will continue to have an incentive to invest the many billions of dollars required of this capital intensive and cyclical business.' ' Chris Dupin