[Federal Register Volume 59, Number 146 (Monday, August 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18655]


[[Page Unknown]]

[Federal Register: August 1, 1994]


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FEDERAL MARITIME COMMISSION
 

Fact Finding Investigation No. 21 Activities of the Trans-
Atlantic Agreement and Its Members; Order

    The Trans-Atlantic Agreement (``TAA'' or ``Agreement''), FMC 
Agreement No. 202-011375, became effective August 31, 1992, pursuant to 
the Shipping Act of 1984 (``1984 Act''), 46 U.S.C. app. 1701, et 
seq.\1\ Fifteen ocean common carriers are members of this Agreement 
seven of which operated as independent, non-conference carriers prior 
to the inception of TAA. According to a commercial data source,\2\ the 
members of the Agreement carry more than seventy percent of the cargo 
moving in both the eastbound and westbound portions of the trans-
Atlantic trade. Because of this market concentration, and the features 
peculiar to this agreement, the Federal Maritime Commission 
(``Commission'') has exercised its authority under the 1984 Act to 
monitor the actions of TAA closely since its effectiveness.
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    \1\As discussed infra, on July 5, 1994, the parties to this 
agreement filed modifications which, inter alia, would change the 
agreement's name to ``Trans-Atlantic Conference Agreement.'' Should 
these modifications become effective, the Commission intends that 
this investigation continue into the activities described herein.
    \2\Port Import and Export Reporting Service, a product of the 
Journal of Commerce.
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    In addition to the collective rate-making authority normally 
contained in conference agreements, TAA includes a unique membership 
provision that distinguishes between ``rate committee'' and ``non-rate 
committee'' members.\3\ Rate committee members discuss and establish 
mutual and binding rates, as in a traditional conference. Non-rate 
committee members may be invited to attend rate committee meetings, and 
may adhere voluntarily to the rates established by the rate committee, 
or set their own rates independently. Rates for all TAA members are 
filed in common tariffs.
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    \3\At present, TAA has nine rate committee members and six non-
rate committee members. The modifications to the Agreement, filed 
July 5, 1994, would eliminate the rate and contract committees and 
all distinctions in membership rights which flow therefrom.
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    The rate committee members also comprise TAA's contract 
committee,\4\ which negotiates service contracts on behalf of the 
contract committee members. Members of the contract committee may elect 
not to participate, or to limit their participation, in TAA service 
contracts, but they may not negotiate contracts independently of 
TAA.\5\ Non-rate committee members may be invited to attend contract 
committee meetings and may participate in contracts negotiated and 
entered into by members of the contract committee, subject to mutual 
agreement on a case by case basis. Non-rate committee members also may 
negotiate and enter into service contracts individually and/or jointly 
between or among themselves.
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    \4\See note 2, supra.
    \5\This would appear to preclude rate/contract committee members 
from participating in service contracts which are negotiated by non-
rate committee members. This is an issue that will be addressed in 
this investigation because of its possible bearing upon various 
allegations of unlawful conduct by TAA, as discussed infra.
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    In addition, TAA members have agreed to a capacity management 
program to reduce excess capacity in the trade. Under the terms of this 
program, each carrier commits to limit its container capacity in the 
trade\6\ by withholding part of its vessels' capacities from the 
shipping public.
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    \6\While the Agreement permits the implementation of a capacity 
management program in both the eastbound and westbound directions, 
the program currently is operating only in the westbound direction. 
The proposed modifications to the Agreement would alter the 
provisions of this program, change its name to the ``Capacity 
Regulation Program'', and make the revised program applicable both 
eastbound and westbound.
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    These features, combined with TAA's large share of the trade in 
both directions, create an environment in which shippers could be 
subjected to serious economic harm should TAA abuse its extensive 
authority. Therefore, the Commission has required periodic reports from 
TAA to track various indicators of competitive activity. Until 
recently, neither these monitoring efforts, nor various informal 
complaints from the shipping public, had persuaded the Commission that 
there was sufficient cause to investigate TAA's practices formally.
    However, in recent weeks, the Commission has received allegations 
and information from a variety of sources that indicate the necessity 
for an investigation of TAA's activities to determine whether 
sufficient evidence exists to warrant formal adjudicatory and 
assessment proceedings and/or to seek an injunction in a U.S. District 
Court under the 1984 Act. For example, TAA is alleged to have 
implemented a program of disproportionately large rate increases and 
other measures directed at some non-vessel-operating common carriers 
(``NVOCCs'') in an effort to curtail competition from those NVOCCs. 
Because TAA's non-rate committee members have relied on NVOCC traffic, 
TAA is said to have agreed also to formulate a program to shift 
proprietary shippers' cargo to non-rate committee members as a quid pro 
quo for the anticipated loss of NVOCC business. Whether any of these 
alleged activities may constitute violations of the 1984 Act is an 
issue which the Commission intends to pursue in this proceeding.
    In Petition No. P5-94, Petition for Further Inquiry into the 
Unlawful Actions of the Trans-Atlantic Agreement (``Petition''), filed 
with the Commission June 8, 1994, Container Freight International I/S 
(``CFI'') and Danish Consolidation Services (``DCS'') alleged, and 
provided data to show, that TAA rigidly applied its 1994 Business Plan 
as a rate ceiling for all shippers except Petitioners, in violation of 
section 10(b)(12) of the 1984 Act, 46 U.S.C. app. 1709(b)(12). In its 
response, TAA denied those allegations and provided information that 
shippers in situations similar to CFI and DCS in 1993 received similar 
treatment in their 1994 contracts. The issues raised in the Petition 
will be included in this investigation. In order to determine the 
responsibilities of TAA with respect to the petitioners, this 
investigation also will gather facts pertinent to the status of these 
associations and their members.
    On June 13, 1994, TAA and its members responded to a Commission 
order (``Section 15 Order''),\7\ issued pursuant to section 15 of the 
1984 Act, 46 U.S.C. app. 1714, which related to allegations of refusals 
of TAA and a member line to accept bookings and of attempts to 
terminate service contracts prematurely. Those allegations were 
contained in an earlier Petition, P3-94, filed by CFI and DCS, which 
was the subject of a separate Commission Order dated March 28, 1994, 26 
SRR 1312 (1994) (``March 28 Order''). The responses to the Section 15 
Order, which were filed on a confidential basis, contain information 
related to several possible violations of the 1984 Act, set forth 
below, and will be used by the Investigative Officers named herein to 
develop those issues in this proceeding.
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    \7\26 SRR 1319 (1994)
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    Another issue raised in Petition P3-94, which the Commission held 
in abeyance in its March 28 Order, supra, is whether TAA has violated 
section 6(g) of the 1984 Act, 46 U.S.C. app. 1705(g), by unreasonably 
increasing transportation costs for CFI and DCS. The Commission staff 
has been gathering information informally on that issue, and the 
Investigative Officers will complete that effort through the greater 
variety of fact-gathering tools available in this proceeding.
    On July 11, 1994, the Commission received Petition No. P6-94, 
Petition of the National Industrial Transportation League for 
Investigation and Relief from the Anticompetitive Activities of the 
Trans-Atlantic Agreement (``NITL Petition''), which alleges that ``TAA 
has unreasonably increased transportation rates, unreasonably decreased 
transportation service, and has generally abused its dominant position 
in the marketplace.'' NITL Petition at 4. Sixteen affidavits were 
submitted in support of the NITL Petition. Petitioners request the 
Commission to investigate the activities of TAA; determine that TAA is 
substantially anticompetitive under section 6(g) of the 1984 Act; and, 
upon that determination, seek to enjoin the Agreement's operation. 
While TAA has not yet had the opportunity to respond to the NITL 
Petition, the Commission will include the issues raised therein in this 
non-adjudicatory investigation. Any reply submitted by TAA or its 
members will be considered by the Investigative Officers named herein.
    The Commission also has received allegations and information that 
TAA and its members may have entered into service contracts with, and 
provided transportation for, NVOCCs which do not have tariffs and 
bonds, as required by sections 8 and 23 of the 1984 Act, 46 U.S.C. app. 
1707 and 1721. Such actions may be violative of sections 10(b)(14) and 
10(b)(15) of the 1984 Act, 46 U.S.C. app. 1709(b)(14) and 1709(b)(15).
    A further issue that the Commission will pursue in this 
investigation is whether TAA or its members are parties to so-called 
``connecting carrier agreements'' with NVOCCs for cargo moving in or 
through the Trans-Atlantic trades, or are abusing non-exclusive 
transshipment agreements with other ocean common carriers in these 
trades.\8\ Such activities could violate various provisions of the 1984 
Act and are the subject of a separate section 15 order, issued 
simultaneously herewith. The responses to that section 15 order will be 
utilized by the Investigative Officers named herein to assist in 
developing this issue.
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    \8\The term ``connecting carrier agreement'' is used generally 
to refer to arrangements under which one carrier serving the point 
or place of origin, and another carrier serving the port or place of 
destination, provide transportation via transshipment at an 
intermediate port. One type of connecting carrier agreement which 
the Commission has recognized and exempted from filing is a non-
exclusive transshipment agreement between ocean common carriers, as 
defined in 46 CFR 572.306. Section 3(17) of the 1984 Act, 46 U.S.C. 
app. 1702(17), defines an NVOCC as a shipper in its relationship 
with an ocean common carrier. Thus, any connecting carrier agreement 
between an ocean common carrier and an NVOCC may constitute a device 
or means to circumvent the otherwise applicable tariffs or service 
contracts, in violation of section 10(b)(4) of the Act, 46 U.S.C. 
app. 1709(b)(4).
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    Finally, the Commission has received allegations that TAA and its 
members may have reached agreements, or taken other actions, which 
discourage or suppress the exercise of the right of members to take 
independent action. This right, which must be incorporated into every 
conference agreement,\9\ has been recognized as the most immediate and 
practical protection for the shipping public against abuse of 
conference power, and has been guarded carefully by the Commission, so 
that its protection is not diminished. Thus, these allegations will be 
investigated in this proceeding. The use of independent action within 
TAA also is the subject of a separate section 15 order issued 
simultaneously herewith. The responses to that order will be considered 
by the Investigative Officers named herein.
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    \9\46 U.S.C. app. 1704(b)(8)
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    As noted above, the parties to this Agreement filed modifications 
on July 5, 1994, which appear to contain both substantive and technical 
changes, and which the Commission staff is currently analyzing. That 
analysis will be coordinated, as necessary, with this investigation, 
particularly as to issues arising under section 6(g) of the 1984 Act.
    Therefore, the Commission is instituting this nonadjudicatory 
proceeding to investigate whether or not TAA, and some or all of the 
fifteen ocean common carriers which comprise TAA's membership, may have 
engaged in, or may be engaged in, activities violative of various 
provisions of the 1984 Act. Such activities may include:

--Unreasonably increasing transportation costs by reducing 
competition in the Trans-Atlantic trades. (Section 6(g) of the 1984 
Act)
--Operating under agreements that have not been filed, or in a 
manner which is not in accordance with the terms of agreements which 
have been filed, with the Commission. (Sections 10(a) (2) and (3))
--Charging, demanding, collecting or receiving greater, less or 
different compensation for transportation of property or for any 
service in connection therewith than the rates and charges shown in 
applicable tariffs or service contracts. (Section 10(b)(1))
--Allowing persons to obtain transportation for property at less 
than the rates or charges established in applicable tariffs or 
service contracts by means of so-called ``connecting carrier'' 
agreements, or by any other unfair or unjust device or means. 
(Section 10(b)(4))
--Retaliating against certain shippers by refusing or threatening to 
refuse cargo space accommodations, or by resorting to other unfair 
or unjustly discriminatory methods. (Section 10(b)(5))
--Subjecting particular persons or descriptions of traffic to 
unreasonable refusals to deal or to undue or unreasonable prejudice 
or disadvantage. (Section 10(b)(12))
--Knowingly and willfully accepting or transporting cargo for the 
account of NVOCCs, or entering into service contracts with NVOCCs or 
in which NVOCCs are listed as affiliates, that do not have tariffs, 
and bonds or other surety, as required by sections 8 and 23 of the 
1984 Act. (Section 10(b) (14) and (15))
--Boycotting or taking other concerted actions resulting in 
unreasonable refusal to deal. (Section 10(c)(1))
--Allocating shippers among specific carriers or prohibiting members 
of TAA from soliciting cargo from particular shippers. (Section 
10(c)(6))


    While the Commission intends that this investigation focus on the 
issues described above, the Investigative Officers will not be 
precluded from developing facts related to any other possible 
violations of the 1984 Act that may be uncovered in the course of this 
proceeding. Interested persons are invited and encouraged to contact 
any of the Investigative Officers named herein, at (202) 523-5783 
(Phone) or (202) 523-5785 (Fax), should they wish to provide testimony 
or evidence, or to contribute in any other manner to the development of 
a complete factual record in this proceeding.
    Therefore, it is ordered, That pursuant to sections 5, 6, 8, 10, 
11, 12 and 23 of the Shipping Act of 1984, 46 U.S.C. app. 1704, 1705, 
1707, 1709, 1710, 1711 and 1721, and part 502, subpart R of title 46 of 
the Code of Federal Regulations, 46 CFR 502.281, et seq., a 
nonadjudicatory investigation is hereby instituted into the practices 
of TAA and its member lines listed in the Appendix to this Order, to 
develop the issues set forth above and to provide a basis for any 
subsequent adjudicatory, assessment or injunctive action by the 
Commission.
    It is further ordered, That the Investigative Officers shall be Wm. 
Jarrel Smith, Jr., Vern W. Hill, Charles L. Haslup III, Peter J. King 
and Martha C. Smith of the Commission. The Investigative Officers shall 
be assisted by such staff members as may be assigned by the 
Commission's Managing Director and shall have full authority to hold 
public or non-public sessions, to resort to all compulsory process 
authorized by law (including the issuance of subpoenas ad testificandum 
and duces tecum), to administer oaths and to perform such other duties 
as may be necessary in accordance with the laws of the United States 
and the regulations of the Commission;
    It is further ordered, That the Investigative Officers shall issue 
a joint final report of findings and recommendations no later than 180 
days after publication of this Order in the Federal Register, and 
interim reports if it appears that more immediate Commission action, 
particularly injunctive action, is necessary, such reports to remain 
confidential unless and until the Commission provides otherwise;
    It is further ordered, That this proceeding shall be discontinued 
upon acceptance of the joint final report of findings and 
recommendations by the Commission, unless otherwise ordered by the 
Commission; and
    It is further ordered, That notice of this Order be published in 
the Federal Register and served upon TAA and its member lines listed in 
the Appendix hereto.

    By the Commission.
Joseph C. Polking,
Secretary.

Appendix

Trans-Atlantic Agreement, Meadows Office Complex, 201 Route 17 
North, Rutherford, NJ 07070
Polish Ocean Lines, c/o Gydnia America Line, Inc., 39 Broadway, 14th 
Floor, New York, NY 10006
Neptune Orient Lines Ltd., 300 Montgomery Street, San Francisco, CA 
94104
Mediterranean Shipping Co. S. A., 96 Morton Street, New York, NY 
10014
DSR/Senator Joint Service, 180 Howard Street, Suite 200, San 
Francisco, CA 94105
Sea-Land Service, Inc., 150 Allen Road, Liberty Corner, NJ 07938
P&O Containers, Ltd., Att: Corporate Counsel, One Meadowlands Plaza-
12th FL., E. Rutherford, NJ 07073
Hapag-Lloyd (America) Inc., One Edgewater Plaza, Staten Island, NY 
10305
Orient Overseas Container Line, 2 World Trade Center, New York, NY 
10048
Atlantic Container Line BV, 50 Cragwood Road, South Plainfield, NJ 
07080
Maersk Line Agency, 221 Main Street, Suite 1450, San Francisco, CA 
94105
Nedlloyd, Inc., 5 World Trade Center, Suite 617, New York, NY 10048
NYK North America, Inc., 455 Market Street, Suite 2100, San 
Francisco, CA 94105
Transportacion Maritima, Mexicana (Mexican Line), c/o Trans-America 
S.S. Agency, 140 W. 6th Street, San Pedro, CA 90731
Tecomar Line, c/o Phonecian Int'l Shipping, 2350 N. Belt. East, 
Suite 720, Houston, TX 77032
Cho Yang Line, c/o Effective Tariff Management Corp., Suite 201, 
6911 Laurel Bowie Road, Bowie, MD 20715

[FR Doc. 94-18655 Filed 7-29-94; 8:45 am]
BILLING CODE 6730-01-M