[Federal Register Volume 59, Number 229 (Wednesday, November 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29407]


[[Page Unknown]]

[Federal Register: November 30, 1994]


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FEDERAL MARITIME COMMISSION
[Docket No. 94-29]

 

Practices of the Trans-Atlantic Agreement and its Members With 
Respect to Independent Action; Order of Investigation and Hearing

    The Trans-Atlantic Agreement (``TAA'' or ``Agreement''), FMC 
Agreement No. 202-011375, first became effective August 31, 1992, 
pursuant to the Shipping Act of 1984 (``1984 Act''), 46 U.S.C. app. 
1701 et seq. Sixteen ocean common carriers, identified in Appendix A 
hereto, currently are members of the Agreement.\1\
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    \1\On October 24, 1994, additional modifications of the basic 
agreement were permitted by the Federal Maritime Commission 
(``Commission'') to take effect under the 1984 Act, among which 
amendments was a change of the agreement's name to the Trans-
Atlantic Conference Agreement. While officially renamed to clarify 
its designation as a conference, the carrier members continue to 
refer to the Agreement as TAA.
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    By Order issued July 27, 1994, the Commission instituted Fact 
Finding Investigation No. 21, entitled Activities of the Trans-Atlantic 
Agreement and Its Members. In the Fact Finding Order, the Commission 
directed the designated Investigative Officers to investigate, inter 
alia, allegations that TAA or its members may have reached agreements 
or taken other actions which discourage or suppress the right of 
members to take independent action (``IA'') on rate or service items. 
The Fact Finding Order also provides that the Investigative Officers 
are not precluded from developing facts related to any possible 
violations of the 1984 Act that may be uncovered in the course of the 
proceeding. In commencing the above nonadjudicatory investigation, the 
Commission's objective was to determine whether sufficient evidence 
exists to warrant formal adjudicatory, assessment or injunctive 
proceedings for alleged violations of the 1984 Act by the TAA or its 
carrier members.
    Through responses to subpenas issued by the Investigative Officers 
and to an order issued by the Commission pursuant to section 15 of the 
1984 Act, 46 U.S.C. app. 1714, through testimony in hearings held in 
connection with the Fact Finding Investigation, and through other 
means, it now appears to the Commission that carrier members of the TAA 
engaged in practices which may have artificially constricted the 
members' right of independent action. Testimony from numerous shipper 
witnesses appearing in the hearing failed to identify any meaningful IA 
rate activities taken by a TAA member, despite shipper requests. To the 
contrary, shippers have testified that they had been informed by TAA 
carrier representatives that independent action would not, or could not 
be taken under TAA.
    In addition to shipper testimony concerning the absence of IA, 
documents have been obtained which indicate that TAA members may have 
agreed to a procedure requiring that rate matters be tabled for 
discussion at a conference meeting before filing an IA rate, and that 
TAA members expected and demanded that other members adhere to this IA 
procedure. Also, it appears that TAA members may have agreed to limit 
their authority to take IAs to one or two designated high level 
executives, and that TAA's Executive Director may have been authorized 
by the members to cancel any tariff filing that he deemed not to be in 
the best interests of TAA. Such strategies appear designed to inhibit 
and curtail IA rather than facilitate its exercise.
    It appears that these alleged agreements or other similar practices 
designed to constrict IA may violate section 5(b)(8), 46 U.S.C. app. 
1704(b)(8), which requires that every conference agreement must provide 
that any conference member may take IA on any rate or service item 
required to be filed in a tariff. Such agreements or practices also may 
violate section 10(a) (2) or (3) of the 1984 Act,\2\ 46 U.S.C. app. 
1709(a) (2) or (3). In addition, such practices may violate provisions 
of the Commission's regulations designed to protect the integrity of 
the right of independent action within conferences. In particular, 46 
CFR 572.801 prohibits a conference from prescribing notice periods for 
adopting, withdrawing, postponing, canceling or taking similar actions 
on independent action matters; from requiring that notice of 
independent action be given by the proposing member to the other 
parties to the agreement; from requiring the proposing member to attend 
a conference meeting, to submit any further information other than that 
necessary to accomplish the filing of the independent tariff item, or 
to comply with any other procedure for the purpose of explaining, 
justifying, or compromising the proposed independent action; and from 
failing to include an IA rate or service item in the conference tariff 
effective no later than 10 days after receipt of an IA notice, 46 CFR 
572.801(b)(2), (c), and (d).
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    \2\Section 10(a) (2) and (3) provide that a carrier or 
conference may not:
    (2) operate under an agreement required to be filed under 
section 5 of this Act that has not become effective under section 6, 
or that has been rejected, disapproved or canceled; or
    (3) operate under an agreement required to be filed under 
section 5 of this Act except in accordance with the terms of the 
agreement or any modifications made by the Commission to the 
agreement.
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    In commencing the Fact Finding Investigation, the Commission noted 
that the right of independent action is a critical ingredient of the 
compromise reflected in the 1984 Act between carrier and shipper 
interests and has been guarded carefully by the Commission. In the 
Conference Report accompanying the 1984 Act, H.R. Rep. No. 98-600, 98th 
Cong., 2d Sess., 34 (1984), the conferees state their belief ``that 
potential reductions in competition will be at least partially offset 
by a member carrier's right of independent action and ability to enter 
and leave the conference freely.'' It appears that TAA may have 
suppressed that right and, thus, removed a competitive counterbalance 
to the conference's ability and desire to increase rates.
    The Commission recognizes that its action instituting this formal 
adjudication necessarily precludes that opportunity to obtain 
additional testimony on this subject from conference and carrier 
witnesses in the context of the ongoing Fact Finding Investigation. The 
Commission is taking action at this time because it believes that there 
is sufficient evidence to warrant such action, and because of the 
importance of this issue to effective Commission regulation of 
conferences. The initiation of a formal adjudicatory proceeding will 
provide the full measure of procedural due process accorded respondents 
in adjudicatory matters generally.
    Now therefore, it is ordered, That pursuant to sections 5, 10, 11, 
and 13 of the 1984 Act, 46 U.S.C. app. 1704, 1709, 1710, and 1712, an 
investigation is instituted to determine:
    (1) Whether the TAA and its carrier members, jointly or severally, 
violated section 5(b)(8) of the 1984 Act by not complying with the 
mandatory independent action provision of that section of the 1984 Act 
and, if found to be operating in violation of section 5(b)(8) of the 
1984 Act, why the Agreement should not be disapproved, canceled or 
modified by the Commission;
    (2) Whether the TAA and its carrier members, joint or severally, 
violated section 10(a)(2) of the 1984 Act by operating under an 
agreement violative of the mandatory independent action provisions of 
section 5(b)(8) of the Shipping Act of 1984, which agreement was never 
filed with the Commission under section 5 and made effective under 
section 6 of the 1984 Act and, if found to be operating in violation of 
section 10(a)(2) of the 1984 Act, why the Agreement should not be 
disapproved, canceled or modified by the Commission;
    (3) Whether the TAA and its carrier members, jointly or severally, 
violated section 10(a)(3) of the 1984 Act by operating under an 
agreement required to be filed under section 5 in a manner which was 
not in accordance with the terms of the agreement, by failing to comply 
with the mandatory independent action provisions of section 5(b)(8) of 
the Shipping Act of 1984 and, if found to be operating in violation of 
section 10(a)(3) of the 1984 Act, why the Agreement should not be 
disapproved, canceled or modified by the Commission;
    (4) Whether the TAA and its carrier members, jointly or severally, 
violated the provisions of 46 CFR 572.801 by operating under an 
agreement violative of the mandatory independent action provisions 
thereof and, if found to be operating in violation of said regulations 
of the Commission, why the Agreement should not be disapproved, 
canceled or modified by the Commission;
    (5) Whether, in the event violations of sections 5(b)(8), 10(a)(2), 
or 10(a)(3) of the 1984 Act are found, civil penalties should be 
assessed and, if so, the amount of such penalties; and
    (6) Whether, in the event violations are found, an appropriate 
cease and desist order should be issued.
    It is further ordered, That a public hearing be held in this 
proceeding and that this matter be assigned for hearing before an 
Administrative Law Judge of the Commission's Office of Administrative 
Law Judges at a date and place to be hereafter determined by the 
Administrative Law Judge in compliance with Rule 61 of the Commission's 
Rules of Practice and Procedure, 46 CFR 502.61. The hearing shall 
include oral testimony and cross-examination in the discretion of the 
Presiding Administrative Law Judge only after consideration has been 
given by the parties and the Presiding Administrative Law Judge to the 
use of alternative forms of dispute resolution, and upon a proper 
showing that there are genuine issues of material fact that cannot be 
resolved on the basis of sworn statements, affidavits, depositions, or 
other documents or that the nature of the matters in issue is such that 
an oral hearing and cross-examination are necessary for the development 
of an adequate record;
    It is further ordered, That TAA (Agreement No. 202-011375) and its 
carrier members specified in Appendix A are designated respondents in 
this proceeding;
    It is further ordered, That the Commission's Bureau of Hearing 
Counsel is designated a party to this proceeding;
    It is further ordered, That notice of this Order be published in 
the Federal Register, and a copy be served on parties of record;
    It is further ordered, That other persons having an interest in 
participating in this proceeding may file petitions for leave to 
intervene in accordance with Rule 72 of the Commission's Rules of 
Practice and Procedure, 46 CFR 502.72;
    It is further ordered, That all further notices, orders, and/or 
decisions issued by or on behalf of the Commission in this proceeding, 
including notice of the time and place of hearing or prehearing 
conference, shall be served on parties of record;
    It is further ordered, That all documents submitted by any party of 
record in this proceeding shall be directed to the Secretary, Federal 
Maritime Commission, Washington, DC 20573, in accordance with Rule 118 
of the Commission's Rules of Practice and Procedure, 46 CFR 502.118, 
and shall be served on parties of record;
    It is further ordered, That in accordance with Rule 61 of the 
Commission's Rules of Practice and Procedure, the initial decision of 
the Administrative Law Judge shall be issued by August 23, 1995 and the 
final decision of the Commission shall be issued by November 23, 1995.
Joseph C. Polking,
Secretary.

Appendix A

Trans-Atlantic Agreement, Meadows Office Complex, 201 Route 17 
North, Rutherford, NJ 07070
Polish Ocean Lines, 1001 Durham Ave., South Plainfield, NJ 07080
Neptune Orient Lines Ltd., c/o Tricom Shipping Agency, 15 Exchange 
Place, 7th Floor, Jersey City, NJ 07302
Mediterranean Shipping, Company S.A., 420 5th Avenue, 8th Floor, New 
York, NY 10008-2702
DSR/Senator Joint Service, 50 Cragwood Rd., South Plainfield, NJ 
07080
Sea-Land Service, Inc., 150 Allen Road, Liberty Corner, NJ 07938
P&O Containers Limited, One Meadowlands Plaza-12th Fl., E. 
Rutherford, NJ 07073
Hapag-Lloyd AG, 399 Hoes Lane, Piscataway, NJ 08854
Orient Overseas Container Line, 4141 Hacienda Drive, Pleasanton, CA 
90731
Atlantic Container Line AB, 50 Cragwood Road, South Plainfield, NJ 
07080
A.P. Moller-Maersk Line, Giralda Farms, P.O. Box 880, Madison, NJ 
07940-0880
Nedlloyd Lijnen BV, c/o Nedlloyd Lines (USA) Corp., 2100 RiverEdge 
Pkwy, Ste. 300, Atlanta, GA 30328-4656
Nippon Yusen Kaisha, NYK Line, 300 Lighting Way, 5th Floor, 
Secaucus, NJ 07094
Transportacion Maritima, Mexicana, S.A. de C.V., c/o Trans-America 
S.S. Agency, 140 W. 6th Street, San Pedro, CA 90731
Tecomar S.A. de C.V., c/o Phoenician Int'l Shipping, 2350 N. Belt 
East, Suite 720, Houston, TX 77032
Cho Yang Shipping Co. Ltd., 301 Route 17 North, 6th Floor, 
Rutherford, NJ 07070
Hanjin Shipping Co., Ltd., 1521 Pier C Street, Long Beach, CA 90813

[FR Doc. 94-29407 Filed 11-29-94; 8:45 am]
BILLING CODE 6730-01-M