[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: 94-29408]


[[Page Unknown]]

[Federal Register: November 30, 1994]


-----------------------------------------------------------------------

FEDERAL MARITIME COMMISSION
[Docket No. 94-28]

 

Vessel Sharing Agreements; Order to Show Cause

    Section 5(a) of the Shipping Act of 1984 (``1984 Act''), 46 U.S.C. 
app. 1704(a), requires the filing at the Federal Maritime Commission 
(``Commission'') of agreements among ocean common carriers regarding 
vessel space/slot charters, sailing arrangements and vessel deployment 
(collectively referred to herein as ``vessel sharing agreements'') for 
the common carriage of goods by water in the foreign commerce of the 
United States.\1\ In recent years, three vessel sharing agreements 
involving the trans-Atlantic trade (``Trade'') have been filed which 
require membership in a separate conference agreement. These agreements 
are Agreement No. 203-011394 (``OOCL Agreement''),\2\ Agreement No. 
203-011395 (``Maersk Agreement'')\3\ and Agreement No. 203-011396 
(``Cooperative Agreement).\4\ They require the participants, Sea-Land 
Service, Inc. (``Sea-Land''), P & O Containers Ltd. (``P & O''), 
Nedlloyd Lijnen B.V. (``Nedlloyd''), Orient Overseas Container Line 
Ltd. (``OOCL'') and A.P. Moller-Maersk Line (``Maersk''), to be members 
of the Trans-Atlantic Agreement (``TAA''), now known as the Trans-
Atlantic Conference Agreement (``TACA''), (Agreement No. 202-
011375).\5\
---------------------------------------------------------------------------

    \1\An agreement is defined in section 3(1) of the 1984 Act, 46 
U.S.C. app. 1702(1), as ``an understanding, arrangement, or 
association'' and may include conference and non-conference 
agreements.
    \2\The agreement allows Orient Overseas Container Line to 
charter vessel space from Sea-Land Service, Inc., P&O Containers 
Ltd. and Nedlloyd Lijnen B.V.
    \3\The agreement allows Sea-Land Service, Inc., P&O Containers 
Ltd. and Nedlloyd Lijnen B.V. to charter vessel space from A.P. 
Moller-Maersk Line.
    \4\This is a discussion among Sea-Land Service, Inc., P&O 
Containers Ltd., Nedlloyd Lijnen B.V., OOCL and Maersk regarding the 
deployment and redeployment of OOCL vessels in the trans-Atlantic 
trade.
    \5\TACA is the recent modification of the Trans-Atlantic 
Agreement. TACA became effective on October 24, 1994.
---------------------------------------------------------------------------

    A conference is defined by the 1984 Act as an ``association of 
ocean common carriers permitted, pursuant to an approved or effective 
agreement, to engage in concerted activity and to utilize a common 
tariff,'' 46 U.S.C. app. 1702(7). Like vessel sharing agreements, 
conference agreements must be filed at the Commission. However, to 
ensure that a conference or its members cannot restrict or otherwise 
control conference membership, section 5(b)(3) of the 1984 Act, 46 
U.S.C. app. 1704(b)(3), requires that a conference agreement must 
permit any member to withdraw from conference membership upon 
reasonable notice without penalty. In addition, section 5(b)(2), 46 
U.S.C. app. 1704(b)(2), states that each conference agreement must 
provide reasonable and equal terms and conditions for admission and 
readmission to conference membership. Any conference agreement that 
imposes withdrawal penalties or unreasonable terms and conditions for 
readmission to a conference violates the 1984 Act and may be canceled 
or modified by the Commission under section 11(c) of the 1984 Act, 46 
U.S.C. app. 1710(c).
    As noted above, the OOCL Agreement, the Maersk Agreement and the 
Cooperative Agreement require Sea-Land, Nedlloyd, P & O, OOCL and 
Maersk to be members of TACA. If one of these carriers withdraws from 
TACA, it is compelled to withdraw from these vessel sharing 
agreements.\6\ The OOCL Agreement, the Maersk Agreement and Agreement 
No. 202-011171, another vessel sharing agreement, involving Sea-Land, P 
& O and Nedlloyd,\7\ impose penalties on the carrier that withdraws 
from the vessel sharing agreements, i.e.,

    \6\The Maersk Agreement gives Maersk, Sea-Land, Nedlloyd and P & 
O the option of terminating or withdrawing from the agreement, if 
one of them withdraws from TACA.
    \7\This agreement involves chartering of Sea-Land vessels in the 
trans-Atlantic trade.

    (1) The withdrawing party must give six months irrevocable 
notice to the other parties.
    (2) The withdrawing party shall cease operation as a common 
carrier in the Trade.
    (3) The withdrawing party shall not re-enter the Trade as a 
common carrier for a period of five (5) years.
    (4) The withdrawing party shall, during the six month notice 
period, make all reasonable efforts to assist the other parties in 
succeeding to the business of the withdrawing party including, but 
not limited to, providing customer lists, and affirmatively 
recommending the other parties to the withdrawing parties customers.
    Because of the withdrawal penalties and conference membership 
requirements, it appears that these four agreements, when examined in 
connection with each other and TACA, do not provide reasonable and 
equal terms and conditions for readmission to TACA and do not permit 
these conference members to withdraw from TACA upon reasonable notice 
without penalty. As a result, the carrier parties appear to accomplish 
indirectly through the interaction of TACA and these vessel sharing 
agreements that which they are precluded from accomplishing directly 
under the 1984 Act.
    Now therefore, it is ordered, That pursuant to section 11 of the 
Shipping Act of 1984, 46 U.S.C. app. 1710, the vessel sharing 
agreements set forth in Appendix A and their members show cause why 
they should not be found to be operating in violation of section 5 
(b)(2) of the Shipping Act of 1984, 46 U.S.C. app. 1704(b)(2), for 
restraining readmission to conference membership for any former vessel 
sharing agreement member willing to serve the particular trade or 
route, and, if found to be operating in violation of section 5(b)(2) of 
the 1984 Act, why these agreements should not be disapproved, canceled 
or modified by the Commission;
    It is further ordered, That pursuant to section 11 of the Shipping 
Act of 1984, the vessel sharing agreements set forth in Appendix A and 
their members show cause why they should not be found to be operating 
in violation of section 5(b)(3) of the Shipping Act of 1984, 46 U.S.C. 
app. 1704(b)(3), for not complying with the conference membership 
withdrawal provisions of that section of the 1984 Act and, if found to 
be operating in violation of section 5(b)(3) of the 1984 Act, why these 
agreements should not be disapproved, canceled or modified by the 
Commission;
    It is further ordered, That should it be determined that the vessel 
sharing agreements and their members have operated in violation of 
section 5(b)(2) or 5(b)(3) of the Shipping Act of Act the matter may, 
pursuant to section 13 of the Shipping Act of 1984, 46 U.S.C. app. 
1712, be referred to an Administrative Law Judge in an appropriate 
proceeding to determine whether penalties should be assessed and, if 
so, the level of such penalties;
    It is further ordered, That this proceeding is limited to the 
submission of facts and memoranda of law, unless otherwise ordered by 
the Commission;
    It is further ordered, That the Commission's Bureau of Hearing 
Counsel be made a party to this proceeding;
    It is further ordered, That the vessel sharing agreements set forth 
in Appendix A and their members are named Respondents in this 
proceeding;
    It is further ordered, That any person having an interest and 
desiring to intervene in this proceeding shall file a petition for 
leave to intervene no later than January 3, 1995, in accordance with 
Rule 72 of the Commission's Rules of Practice and Procedure, 46 CFR 
502.72;
    It is further ordered, That affidavits of fact and memoranda of law 
shall be filed by Respondents and any intervenors in support of the 
vessel sharing agreements no later than January 20, 1995. Reply 
affidavits and Memoranda of law shall be filed by the Bureau of Hearing 
Counsel and any intervenors in opposition to the vessel sharing 
agreements no later than February 21, 1995. Rebuttal affidavits and 
memoranda of law shall be filed by Respondents and inrtervenors in 
support of the vessel sharing agreements no later than March 3, 1995;
    It is further ordered, That:
    (a) Should any party believe that an evidentiary hearing is 
required, that party must submit a request for such hearing together 
with a statement setting forth in detail the facts to be provided, the 
relevance of those facts to the issues in this proceeding, a 
description of the evidence which would be adduced, and why affidavits 
of fact are not sufficient to present such evidence;
    (b) Should any party believe that an oral argument is required, 
that party must submit a request specifying the reasons therefore and 
why argument by memorandum is inadequate to present the party's case; 
and
    (c) Any such request for evidentiary hearing or oral argument shall 
be filed no later than March 10, 1995;
    It is further ordered, That notice of this Order to Show Cause be 
published in the Federal Register, and that a copy thereof be served 
upon Respondents;
    It is further ordered, That all documents submitted by any party of 
record in this proceeding shall be filed in accordance with Rule 118 of 
the Commission's Rules of Practice and Procedure, 46 CFR 502.118, as 
well as being mailed directly to all parties of record;
    Finally, it is ordered, That pursuant to the terms of Rule 61 of 
the Commission's Rules of Practice and Procedure, 46 CFR 502.61, the 
final decision of the Commission in this proceeding shall be issued by 
May 3, 1995.

    By the Commission.
Joseph C. Polking,
Secretary.

Appendix A

Agreement 203-011171
    Sea-Land Service, Inc.
    P&O Containers Ltd.
    Nedlloyd Lijnen B.V.
Agreement 203-011394
    Sea-Land Service, Inc.
    P&O Containers Ltd.
    Nedlloyd Lijnen B.V.
    Orient Overseas Container Line Ltd.
Agreement 203-011395
    Sea-Land Service, Inc.
    P&O Containers Ltd.
    Nedlloyd Lijnen B.V.
    A.P. Moller-Maersk Line
Agreement 203-011396
    Sea-Land Service, Inc.
    P&O Containers Ltd.
    Nedlloyd Lijnen B.V.
    Orient Overseas Container Line Ltd.
    A.P. Moller-Maersk Line

[FR Doc. 94-29408 Filed 11-29-94; 8:45 am]
BILLING CODE 6730-01-M