[Federal Register Volume 61, Number 171 (Tuesday, September 3, 1996)]
[Notices]
[Pages 46484-46488]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22274]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Universal Shippers Association, Inc.; Proposed 
Final Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec. 16(b)-(h), that a proposed Final 
Judgment, Stipulation, and Competitive Impact Statement have been filed 
with the United States District Court for the Eastern District of 
Virginia in United States v. Universal Shippers Association, Inc., 
Civil No. 96-1154-A as to Universal Shippers Association, Inc.
    The Complaint alleges that the defendant and Lykes Bros. Steamship 
Co., Inc. entered into a contract containing an ``automatic rate 
differential clause,'' which required Lykes to charge competing 
shippers of wine and spirits from Europe to the United States rates for 
ocean transportation services that were at least 5% higher than 
Universal's for any lesser volume of cargo. This clause required 
maintenance of a 5% differential in favor of Universal at all times, 
thereby placing shippers who compete with Universal at a competitive 
disadvantage.
    The proposed Final Judgment enjoins the defendant from maintaining, 
agreeing to, or enforcing an automatic rate differential clause in any 
of its contracts, and also requires defendant to establish an antitrust 
compliance program.
    Public comment on the proposed Final Judgment is invited within the 
statutory 60-day comment period. Such comments and responses thereto 
will be published in the Federal Register and filed with the Court. 
Comments should be directed to Roger W. Fones, Chief, Transportation, 
Energy and Agriculture Section, Suite 500, U.S. Department of Justice, 
Antitrust Division, 325 Seventh Street, N.W., Washington, D.C. 20530 
(telephone: 202/307-6351).
Rebecca P. Dick,
Deputy Director, Office of Operations, Antitrust Division.

Stipulation

    It is stipulated by and between the undersigned parties, by their 
respective attorneys that:
    1. The Court has jurisdiction over the subject matter of this 
action and over each of the parties thereto, and venue of this action 
is proper in the Eastern District of Virginia;
    2. The parties consent that a Final Judgment in the form hereto 
attached may be filed and entered by the Court, upon the motion of any 
party or upon the Court's own motion, at any time after compliance with 
the requirements of the Antitrust Procedures and Penalties Act (15 
U.S.C. Sec. 16), and without further notice to any party or other 
proceedings, provided that Plaintiff has not withdrawn its consent, 
which it may do at any time before the entry of the proposed Final 
Judgment by serving notice thereof on Defendants and by filing that 
notice with the Court;
    3. In the event Plaintiff withdraws its consent or if the proposed 
Final Judgment is not entered pursuant to this Stipulation, this 
Stipulation shall be of no effect whatsoever, and the making of this 
Stipulation shall be without prejudice to any party in this or in any 
other proceeding.
    This 22nd day of August, 1996.


[[Page 46485]]


    For the Plaintiff United States of America:
Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section.
Donna N. Kooperstein,
Assistant Chief, Transportation, Energy and Agriculture Section.
Michele B. Cano,
Attorney, Transportation, Energy and Agriculture Section.
Dennis E. Szybala,
Assistant United States Attorney V.S.B. # 22785.
    For the Defendant Universal Shippers Association, Inc.:
Ronald N. Cobert, Esquire,
Grove, Jaskiewicz and Cobert, Suite 400, 1730 M Street, N.W., 
Washington, D.C. 20036-4579.

Final Judgment

    Plaintiff, United States of America, filed its Complaint on August 
22, 1996. United States of America and Universal Shippers Association, 
Inc., by their respective attorneys, have consented to the entry of 
this Final Judgment without trial or adjudication of any issue of fact 
or law. This Final Judgment shall not be evidence against nor an 
admission by any party with respect to any issue of fact or law. 
Therefore, before the taking of any testimony and without trial or 
adjudication of any issue of fact or law herein, and upon consent of 
the parties, it is hereby
    Ordered, Adjudged, and Decreed, as follows:

I

Jurisdiction

    This Court has jurisdiction over the subject matter of this action 
and over each of the parties consenting hereto. The Complaint states a 
claim upon which relief may be granted against the defendant under 
Section 1 of the Sherman Act, 15 U.S.C. Sec. 1.

II

Definitions

    As used herein, the term:
    (A) Automatic rate differential clause means any provision in a 
contract the defendant has with an ocean common carrier or conference 
that requires the ocean common carrier or conference to maintain a 
differential in rates, whether expressed as a percentage or as a 
specific amount, between rates charged by the ocean common carrier or 
conference to the defendant under the contract and rates charged by the 
ocean common carrier or conference to any other shipper of the same or 
competing commodities for lesser volumes.
    (B) Contract means any contract for the provision of ocean liner 
transportation services, including a service contract. ``Contract'' 
does not include any contract for charter services or for ocean common 
carriage provided at a tariff rate filed pursuant to 46 U.S.C. App. 
Sec. 1707.
    (C) Conference means 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 in accordance with 46 
U.S.C. App. Sec. 1701, et seq.
    (D) Defendant means Universal Shippers Association, Inc., each of 
its predecessors, successors, divisions, and subsidiaries, each other 
person directly or indirectly, wholly or in part, owned or controlled 
by it, and each partnership or joint venture to which any of them is a 
party, and all present and former employees, directors, officers, 
agents, consultants or other persons acting for or on behalf of any of 
them.
    (E) Service contract means any contract between a shipper and an 
ocean common carrier or conference in which the shipper makes a 
commitment to provide a certain minimum quantity of cargo over a fixed 
time period, and the ocean common carrier or conference commits to a 
certain rate or rate schedule as well as a defined service level.
    (F) Shipper means the owner of cargo transported or the person for 
whose account the ocean transportation of cargo is provided or the 
person to whom delivery of cargo is made; ``shipper'' also means any 
group of shippers, including a shippers' association.
    (G) Shippers' association means a group of shippers that 
consolidates or distributes freight on a nonprofit basis for the 
members of the group in order to secure carload, truckload, or other 
volume rates or service contracts.

III

Applicability

    (A) This Final Judgment applies to the defendant, and to each of 
its subsidiaries, successors, assigns, officers, directors, employees, 
and agents.

IV

Prohibited Conduct

    Defendant is restrained and enjoined from maintaining, adopting, 
agreeing to, abiding by, or enforcing an automatic rate differential 
clause in any contract.

V

Nullification

    Any automatic rate differential clause in any of defendant's 
contracts shall be null and void by virtue of this Final Judgment. 
Promptly upon entry of this Final Judgment, defendant shall notify in 
writing each ocean common carrier or conference with whom defendant has 
a contract containing an automatic rate differential clause that this 
Final Judgment prohibits such clause.

VI

Compliance Measures

    Defendant is ordered:
    (A) To send, promptly upon entry of this Final Judgment, a copy of 
this Final Judgment to each ocean common carrier or conference whose 
contract with defendant contains an automatic rate differential clause;
    (B) To provide a copy of this Final Judgment to each director and 
officer at the time they take office, and to those employees that 
negotiate contracts, and to maintain a record or log of signatures of 
those persons that they received, read, understand to the best of their 
ability, and agree to abide by this Final Judgment and that they have 
been advised and understand that noncompliance with the Final Judgment 
may result in disciplinary measures and also may result in conviction 
of the person for criminal contempt of court;
    (C) To maintain an antitrust compliance program which shall include 
an annual briefing of the defendant's Board of Directors, officers and 
non-clerical employees on this Final Judgment and the antitrust laws.

VII

Plaintiff Access

    (A) To determine or secure compliance with this Final Judgment and 
for no other purpose, duly authorized representatives of the plaintiff 
shall, upon written request of the Assistant Attorney General in charge 
of the Antitrust Division, and on reasonable notice to the defendant 
made to its principal office, be permitted, subject to any legally 
recognized privilege:
    (1) Access during the defendant's office hours to inspect and copy 
all documents in the possession or under the control of the defendant, 
who may have counsel present, relating to any matters contained in this 
Final Judgment; and
    (2) Subject to the reasonable convenience of the defendant and 
without restraint or interference from it, to interview officers, 
employees or agents of the defendant, who may have counsel present, 
regarding such matters.
    (B) Upon the written request of the Assistant Attorney General in 
charge of the Antitrust Division made to the defendant's principal 
office, the

[[Page 46486]]

defendant shall submit such written reports, under oath if requested, 
relating to any matters contained in this Final Judgment as may be 
reasonably requested, subject to any legally recognized privilege.
    (C) No information or documents obtained by the means provided in 
Section VIII shall be divulged by the plaintiff to any person other 
than a duly authorized representative of the Executive Branch of the 
United States, except in the course of legal proceedings to which the 
United States is a party, or for the purpose of securing compliance 
with this Final Judgment, or as otherwise required by law.
    (D) If at the time information or documents are furnished by the 
defendant to plaintiff, the defendant represents and identifies in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(7) of the Federal 
Rules of Civil Procedure, and defendant marks each pertinent page of 
such material, ``Subject to claim of protection under Rule 26(c)(7) of 
the Federal Rules of Civil Procedure,'' then 10 days notice shall be 
given by plaintiff to defendant prior to divulging such material in any 
legal proceeding (other than a grand jury proceeding) to which 
defendant is not a party.

VIII

Further Elements of the Final Judgment

    (A) This Final Judgment shall expire ten years from the date of 
entry.
    (B) Jurisdiction is retained by this Court for the purpose of 
enabling the parties to this Final Judgment to apply to this Court at 
any time for further orders and directions as may be necessary or 
appropriate to carry out or construe this Final Judgment, to modify or 
terminate any of its provisions, to enforce compliance, and to punish 
violations of its provisions.
    (C) Entry of this Final Judgment is in the public interest.

    Dated: ________.

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United States District Judge

Competitive Impact Statement

    Pursuant to Section 2(b) of the Antitrust Procedures and Penalties 
Act, 15 U.S.C. Sec. 16(b)-(h), the United States submits this 
Competitive Impact Statement relating to the proposed Final Judgment 
submitted for entry against and with the consent of defendant Universal 
Shippers Association, Inc. (``Universal'') in this civil proceeding.

I

Nature and Purpose of the Proceeding

    On August 22, 1996, the United States filed a civil antitrust 
Complaint alleging that Universal Shippers Association, Inc. 
(``Universal'') entered into an agreement with an ocean common carrier 
that unreasonably restrains competition for ocean transportation 
services in violation of Section 1 of the Sherman Act, 15 U.S.C. 
Sec. 1.
    On the same date, the United States and Universal filed a 
Stipulation by which they consented to the entry of a proposed Final 
Judgment designed to undo the challenged agreement and prevent any 
recurrence of such agreements in the future.
    Entry of the proposed Final Judgment will terminate this action, 
except that the Court will retain jurisdiction over the matter for any 
further proceedings that may be required to interpret, enforce or 
modify the Judgment or to punish violations of any of its provisions.

II

Practices Giving Rise to the Alleged Violation

    Defendant Universal is a Delaware corporation with its principal 
place of business in Bedford, Virginia. A shippers' association is a 
group of ocean transportation customers (``shippers'') that 
consolidates or distributes freight for its members on a nonprofit 
basis in order to secure volume discounts. Universal is itself a 
shippers' association and is composed of member shippers' associations 
and large independent distillers that ship their own products. 
Universal accounts for about half of the wine and spirits carried 
across the North Atlantic.
    Prices in the ocean shipping industry are not set in a vigorously 
competitive market. The ocean shipping industry is comprised of both 
conference and independent ocean common carriers. A conference is a 
legal cartel of ocean common carriers; its members receive immunity 
from the antitrust laws (46 U.S.C. App. Sec. 1701, et seq., ``1984 
Shipping Act'') to agree on prices and engage in other otherwise 
illegal concerted activity. There are over 15 carriers that serve the 
North Atlantic trade between the United States and Europe, but the 
majority of these are members of the Trans-Atlantic Conference 
Agreement (``TACA''). TACA is a conference that has received antitrust 
immunity to jointly fix prices and limit capacity in the North Atlantic 
trade. Their prices are set forth in tariffs filed with the Federal 
Maritime Commission (``FMC'') and are available to all shippers. Lykes 
Bros. Steamship Co., Inc. (``Lykes'') is not a member of TACA. Lykes is 
an ocean common carrier that provides ocean transportation services for 
cargo worldwide, including services in the North Atlantic trade between 
the United States and Northern Europe. It operates as an independent 
carrier in the North Atlantic, offering transportation services to all 
shippers at tariff prices that it sets independently. In trades with a 
significant conference, such as the North Atlantic trade, independents 
as well as the conference possess some degree of market power over 
freight rates because there are relatively few separate sellers.
    Under the 1984 Shipping Act, independent carriers or conferences 
may enter into service contracts with shippers or shippers' 
associations. In a service contract, a shipper or shippers' association 
commits to provide a certain minimum quantity of cargo over a fixed 
period, and the ocean carrier or conference commits to a certain price 
schedule based on that volume. Service contract prices are typically 
lower than the tariff prices.\1\
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    \1\ Independent carriers and conferences may also enter into 
service contracts with non-vessel operating common carriers 
(``NVOCCs''). An NVOCC offers transportation services to shippers 
but does not operate the vessels. NVOCCs typically consolidate the 
freight of small shippers and then arrange for carriage of the 
consolidated freight.
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    Universal entered into a service contract with Lykes on or about 
October 26, 1993, for the ocean transportation of wine and spirits from 
Northern Europe to the United States. The Lykes/Universal contract 
contained the following ``automatic rate differential clause'':

    Carrier guarantees that rates and charges in this Contract shall 
at all times be at least 5% lower than any other tariff, Time Volume 
or other service contract rates for similar commodities at a lesser 
volume and essentially similar transportation service. As necessary, 
Carrier shall reduce rates/charges in this Contract as necessary to 
honor this guarantee, promptly informing the Association and the 
FMC.

This clause requires Lykes to charge competing shippers or shippers' 
associations that purchase lesser volumes than Universal a rate that is 
at least 5% higher than Universal's.
    Other shippers and shippers' associations compete with Universal 
and its members for importing wines and spirits into the United States. 
Universal's competitors seek to minimize their costs by, inter alia, 
obtaining the lowest possible rates for the ocean transportation of 
wine and

[[Page 46487]]

spirits. But the automatic rate differential clause limited Lykes' 
incentive to offer to Universal's competitors transportation rates as 
favorable as Lykes could otherwise offer. To comply with the clause, 
Lykes must either offer these shippers prices that are at least 5% 
higher than the prices in Universal's service contract, or it must 
lower Universal's price for all of Universal's service contract 
shipments in order to maintain the 5% differential. The latter is not 
an attractive alternative for Lykes, given Universal's volume. And in 
either case, Universal's competitors pay prices 5% higher than 
Universal--regardless of Lykes' cost of providing them with 
transportation--which adversely affects their ability to compete with 
Universal.
    Where there are few separate sellers, as is the case here, an 
automatic rate differential clause in effect places a tax on the 
buyer's competitors. There is a danger that this tax will protect the 
buyer from competition from firms whose costs may otherwise be lower 
than its own, thus erecting barriers to competition. It is the raising 
of these barriers to competition with Universal, which already has a 
substantial market presence, that constitutes the unreasonable 
restraint of trade in this case.

III

Explanation of the Proposed Final Judgment

    The Plaintiff and Universal have stipulated that the Court may 
enter the proposed Final Judgment after compliance with the Antitrust 
Procedures and Penalties Act, 15 U.S.C. Sec. 16 (b)-(h). The proposed 
Final Judgment provides that its entry does not constitute any evidence 
against or admission of any party concerning any issue of fact or law.
    Under the provisions of Section 2(e) of the Antitrust Procedures 
and Penalties Act 15 U.S.C. Sec. 16(e), the proposed Final Judgment may 
not be entered unless the Court finds that entry is in the public 
interest. Section VIII(C) of the proposed Final Judgment sets forth 
such a finding.
    The proposed Final Judgment is designed to eliminate the automatic 
differential clause from defendant's contracts for the provision of 
ocean liner transportation services with ocean common carriers or 
conferences. Under Section IV of the proposed Final Judgment, Universal 
is restrained and enjoined from maintaining, adopting, agreeing to, 
abiding by, or enforcing an automatic rate differential clause in any 
contract with an ocean common carrier or conference. Section VIII(A) of 
the proposed Final Judgment provides for a term of ten years. Section V 
nullifies any automatic rate differential clauses currently in effect 
in any of Universal's contracts with an ocean common carrier or 
conference.
    Section VI(A) of the proposed Final Judgment requires Universal to 
send a copy of the Final Judgment to each ocean common carrier whose 
contract with Universal contains an automatic rate differential clause. 
Section IV(B) requires Universal to provide a copy of the Final 
Judgment to each director and officer at the time they take office, and 
to those employees that negotiate contracts for the provision of ocean 
liner transportation services, and to maintain a record and log of 
those signatures that they received, read, understand, and agree to 
abide by the Final Judgment. Section VI also obligates Universal to 
maintain an antitrust compliance program that meets the obligations 
specified in Section VI(C). In addition, Section VII of the Final 
Judgment sets forth a series of measures by which the plaintiff may 
have access to information needed to determine or secure Universal's 
compliance with the Final Judgment.
    The relief in the proposed Final Judgment removes the contractual 
clause that requires the ocean common carrier or conference to place in 
essence a 5% ``tax'' on the shipping costs of Universal's competitors. 
It restores to Universal's competitors the ability to compete for the 
lowest shipping prices.

IV

Alternative to the Proposed Final Judgment

    The alternative to the proposed Final Judgment would be a full 
trial on the merits of the case. In the view of the Department of 
Justice, such a trial would involve substantial costs to both the 
United States and Universal and is not warranted because the proposed 
Final Judgment provides relief that will fully remedy the violations of 
the Sherman Act alleged in the United States' Complaint.

V

Remedies Available to Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damage suffered, as well as costs and reasonable attorney's fees. 
Entry of the proposed Final Judgment will neither impair nor assist in 
the bringing of such actions. Under the provisions of Section 5(a) of 
the Clayton Act, 15 U.S.C. Sec. 16(a), the proposed Final Judgment has 
no prima facie effect in any subsequent action that may be brought 
against the defendant in this matter.

VI

Procedures Available for Modification of the Proposed Final Judgment

    As provided by the Antitrust Procedures and Penalties Act, any 
person believing that the proposed Judgment should be modified may 
submit written comments to Roger W. Fones, Chief; Transportation, 
Energy, and Agriculture Section; Department of Justice, Antitrust 
Division; Liberty Place Building, Suite 500; 325 Seventh Street, N.W.; 
Washington, D.C. 20530, within the 60-day period provided by the Act. 
Comments received, and the Government's responses to them, will be 
filed with the Court and published in the Federal Register. All 
comments will be given due consideration by the Department of Justice, 
which remains free, pursuant to Paragraph 2 of the Stipulation, to 
withdraw its consent to the proposed Final Judgment at any time before 
its entry if the Department should determine that some modification of 
the Judgment is warranted in the public interest. The proposed Judgment 
itself provides that the Court will retain jurisdiction over this 
action, and that the parties may apply to the Court for such orders as 
may be necessary or appropriate for the modification, interpretation, 
or enforcement of the Judgment.

VII

Determinative Documents

    No materials and documents of the type described in Section 2(b) of 
the Antitrust Procedures and Penalties Act, 15 U.S.C. Sec. 16(b), were 
considered in formulating the proposed Judgment, consequently, none are 
filed herewith.

    Dated: August 22, 1996.
      Respectfully submitted,
Michele B. Cano,
Attorney, Antitrust Division, U.S. Department of Justice, 325 Seventh 
Street, N.W., Suite 500, Washington, D.C. 2530, (202) 307-0813.
Dennis E. Szybala,
Assistant United States Attorney, V.S.B. #22785.

Certificate of Service

    I hereby certify that, on this day August 22, 1996, I have caused 
to be served, by hand delivery, a copy of the foregoing Complaint, 
Stipulation, proposed Final Judgment, and Competitive Impact Statement 
on counsel for Universal Shippers

[[Page 46488]]

Association, Inc. at the address below: Ronald N. Cobert, Esq., Grove, 
Jaskiewicz and Cobert, 1730 M Street, N.W., Suite 400, Washington, D.C. 
20036-4579.
Michele B. Cano,
United States Department of Justice, Antitrust Division, 325 Seventh 
Street, N.W., Suite 500, Washington, D.C. 20530.
[FR Doc. 96-22274 Filed 8-30-96; 8:45 am]
BILLING CODE 4410-01-M