Friedmann: Expect scaled back antitrust bill in new Congress

Friedmann: Expect scaled back antitrust bill in new Congress    The defeat of influential Congressman James Oberstar in the mid-term elections this month has thrown into question the future of a potential legislative end to liner carrier antitrust immunity in trades to and from the United States.

Oberstar

   Oberstar, head of the House Transportation and Infrastructure Committee, had authored a bill that would have not only eliminated antitrust immunity for carriers, but could have severely restricted their ability to operate vessel sharing agreements. American Shipper comprehensively examined the issue last week .

Friedmann

   Peter Friedmann, executive director of the Agriculture Transportation Coalition (AgTC), told American Shipper this week he expects a new version of the bill will re-emerge in 2011, but that it will be scaled down from Oberstar's version.
   'It's unlikely the Oberstar bill will be taken up during a lame duck session,' he said. 'I expect there will be legislation in the new Congress, but it will probably focus on the pure repeal of antitrust immunity for carriers and include less of the regulatory oversight that the Oberstar bill was centered upon. I suspect the bill would be quite a bit different from the Oberstar bill.
   'There were some blanket prohibitions on joint carrier activities, including joint carrier activities that are automatically permissible under antitrust laws. Vessel sharing agreements (VSA) would have been difficult to implement. That would be falling out of any legislation next year. If something is efficiency enhancing, our antitrust laws encourage it and the market share of these VSAs come nowhere close to approximating the thresholds for antitrust activity.'
   Friedmann, whose group represents the interests of U.S. agricultural and forest products exporters, said it wasn't clear whether Oberstar's far-reaching bill would have even been amenable to both sides.
   'There was discussion regarding provisions in the legislation about canceled bookings,' he said. 'If the legislation was to penalize the carrier and the shipper for failing to fulfill their booking commitments, then that would be an interesting topic. I'm not sure carriers or shippers are ready to go in that direction. But a lot of shippers would be perfectly amenable to be subjected to penalties for no-shows (so long as carriers are subjected to similar penalties for canceling bookings).'
   Friedmann noted that canceled bookings earlier this year were 'what precipitated the vivid hearings in Congress this year. Clearly what motivated Congress has been the capacity constraints on agricultural exports. Retail is, of course, an important part of our economy, but those who testified before Congress, they were only ag and forest products exporters.'
   Friedmann also addressed the question of whether an end to antitrust immunity could impel carriers to scale back on the services they provide to U.S. exporters, many of whom are found in hard-to-reach inland locations that don't mesh with U.S. import destinations.
   'That has been threatened by the World Shipping Council (which represents the interests of global liner carriers and has fought to preserve U.S. antitrust immunity),' Friedmann said. 'There have been veiled threats that service will be reduced to the U.S. without antitrust immunity. But that doesn't hold water. Export service to Europe was not reduced after the EU (liner antitrust immunity) ban was enacted. Transportation economists can easily explain why collective pricing and capacity discussion by service providers will always lead to a reduction in service, not an expansion.
   'That's in fact why we have the antitrust laws. Why does OPEC exist? It's not to expand the supply of oil in the world, but to restrict it. There's no reason to seek antitrust immunity unless you are trying to restrict capacity and drive rates up. People don't try to control the marketplace in order to increase supply.'
   Friedmann said that U.S. export shippers don't expect carriers to serve them at unprofitable levels.
   'No carrier in a market is beholden to carry containers to inland points,' he said. 'They should only do it if it makes economic sense for them, if it's profitable. As a general rule, shippers and AgTC didn't voice complaints about Maersk (which several years back all but pulled out of serving U.S. inland points). That was an individual company making an individual decision based on economic factors.
   'Nobody is expecting a carrier to provide a service that doesn't make sense economically. But AgTC members in South Dakota and Arkansas get containers. They pay a lot for them, but they get them. What we don't want is carriers collectively deciding whether carriers provide a service. We want them individually deciding that.'
   He applauded executives from Maersk and MSC, both of whom in recent weeks said they see an inevitable end to U.S. antitrust immunity.
   'They have seen through this fog of tradition,' Friedmann said. 'We want an environment where a group of shippers can sit down with a carrier and talk about providing service, without that carrier talking to its competitors about service parameters and pricing. Joint carrier discussions have a chilling effect on innovation.'
   As for service levels, which shippers have complained about throughout 2010, Friedmann said he's hearing fewer complaints from ag exporters of late.
   'But we are concerned that import volumes are going to be dropping,' he said. 'Cotton is moving at all-time high volumes. Soy is moving at high volumes. Dried distillers grains (a byproduct of ethanol used extensively in Asia for pig feeding) are moving at huge volumes. It's sucking up all the excess containers in the Midwest. And we have reports that there is a lot of grain and soy sitting on the ground looking for capacity.' ' Eric Johnson