[Federal Register Volume 62, Number 89 (Thursday, May 8, 1997)]
[Notices]
[Pages 25195-25197]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11998]
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FEDERAL MARITIME COMMISSION
[Docket No. 97-07]
Possible Unfiled Agreement Between Hyundai Merchant Marine
Company, Ltd., and Mediterranean Shipping Co., S.A.; Order of
Investigation and Hearing
On September 6, 1995, Hyundai Merchant Marine Company, Ltd.
(``Hyundai'') and Mediterranean Shipping Co., S.A. (``MSC'') filed with
the Federal Maritime Commission (``Commission'' or ``FMC'') FMC
Agreement No. 217-011512 (``FMC agreement'' or ``filed agreement''),
under which Hyundai is authorized to charter space on MSC's vessels in
the trade between U.S. Atlantic and Gulf ports and ports in North
Europe. At the time this FMC agreement was filed, MSC was a member of
the Trans-Atlantic Conference Agreement (``TACA''). Hyundai became a
member of TACA on September 11, 1995.
As a result of discussions with filing counsel concerning possible
restrictions on the rights of TACA members to charter space to non-
conference carriers, the staff questioned whether the FMC agreement
reflected the entire agreement between the parties. There was no
reference to TACA membership in the FMC agreement, as initially filed.
In response to the staff's inquiry, on September 29, 1995, the parties
filed an amendment to the FMC agreement, as follows:
5.7 In the event either or both of the Parties shall, at any
time during the period this agreement may remain in effect, adhere
to any other agreement in the Trade, including the Trans-Atlantic
Conference Agreement (``TACA'') and/or Transatlantic Policing
Agreement (``TPA'') and any successor to the TACA and/or TPA, they
herein undertake to abide by the terms and conditions of any such
other agreements and, in the particular case of the TACA, the
provisions of Article 15 thereof.
The FMC agreement between Hyundai and MSC, as amended, became
effective, pursuant to section 6 of the Shipping Act of 1984, 46 U.S.C.
app. 1701, et seq. (``1984 Act'') on October 21, 1995.
Article 15 of the TACA agreement is entitled ``Adherence to
Tariffs, Service Contracts and Authorized Practices; Conflicts of
Interest.'' Article 15.3 thereof reads, in part:
All Parties shall strictly abide by and observe Agreement rules,
regulations and authorized practices and no Party shall engage,
directly or indirectly, through any holding, parent, subsidiary,
associated or affiliated company or companies (``Related
Companies'') or otherwise, in the transportation of cargo in the
Trade at rates or on terms and conditions other than those agreed
upon or otherwise authorized pursuant to the provisions of this
Agreement * * *.
On the basis of concerns that this language may preclude TACA
members from chartering space on their vessels to non-conference lines,
the Commission issued an order pursuant to section 15 of the 1984 Act
on February 22, 1996, requiring information and documents related to
this issue.\1\
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\1\ This section 15 order was addressed to TACA and its
seventeen member lines. Responses were submitted in May 1996, and
required informal follow-up with the conference and its members
which was completed in December 1996.
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In response to that order, Hyundai and MSC produced a number of
documents, including a slot charter agreement between Hyundai and MSC,
dated August 4, 1995, and referred to by the parties as a memorandum of
agreement (``MOA''). In addition, Hyundai and MSC produced copies of
correspondence between negotiators for the two carriers, indicating
that the terms of the MOA were the focus of extensive negotiations,
while the first draft of the FMC agreement was agreed to without change
or substantive discussion. Moreover, the negotiator for MSC informed
his counterpart at Hyundai that, where there were discrepancies between
the two documents, the terms of the MOA would supersede those of the
filed agreement.
The MOA is a detailed document with four appendices,\2\ while the
FMC agreement is written in general terms and does not contain any
appendices or certain other specifics set forth in the MOA.\3\ In
addition to this difference in the level of detail, there are at least
three differences of a more substantive nature between the filed
agreement and the MOA.
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\2\ These appendices are: 1. Containerships/capacity/schedules;
2. Financial arrangements; 3. Slot Charter Party; and 4.
Restrictions in respect of dangerous goods.
\3\ E.g., compensation for unavailable slots; carriage of empty
containers; intercoastal moves; utilization reports; costs of
vessels out of service; etc.
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First, the MOA makes several references, on the title page and in
the preamble, to the relationship between this slot charter and TACA.
The title page of the MOA states that the slot charter agreement is
``Under the Trans Atlantic Conference Agreement.'' The preamble states:
This agreement is adopted pursuant to the Conference
Agreement.\4\ In furtherance of the Conference agreement, the
parties have met and communicated among themselves for the purpose
of effecting the purposes and provisions of the Conference
Agreement. Their decisions are set forth in this agreement. This
agreement is supplemental to the Conference Agreement and is subject
to all of the rights, obligations, definitions, terms and conditions
set forth in the Conference Agreement.
\4\ Conference Agreement is defined by the MOA to mean TACA.
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The filed agreement contains no counterpart to this preamble, nor
any reference to TACA on the title page.
Second, as originally signed by the parties, the MOA contained an
Article 15 which stated:
15. Conference Membership
Hyundai and MSC shall take a common position to membership in
TACA for the period of this Agreement. No Party will resign from
TACA without the agreement of the other Party.
Nothing similar to this commitment appears in the filed agreement.
The MOA appears to have been amended by the parties on May 20, 1996, to
delete this conference membership provision.\5\ A copy of that
amendment to the unfiled MOA was submitted to the Commission on June
28, 1996.
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\5\ The MOA was first disclosed to the Commission on May 7,
1996, in response to the section 15 order.
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The third significant difference between the MOA and the filed
agreement is found in the duration of the respective agreements. The
MOA states that:
This agreement will have a firm validity of three years and
shall commence on October 1st, 1995 or latest January 1st, 1996. It
will remain in effect for a minimum of 36 months. [T]hereafter it
will be subject to termination on six months notice given by any
party in writing to the party [sic]. The earliest effective notice
of termination date, however, will be March 30th, 1998.
Article 9 of the filed agreement states, in pertinent part, that:
[[Page 25196]]
This Agreement may be implemented as from the date it becomes
lawfully effective and its term shall be of indefinite duration. The
Parties may terminate or suspend this Agreement at any time upon
such terms as they may determine * * *.
The 1984 Act and the Commission's regulations are explicit in
requiring that a true and complete copy of every applicable agreement
be filed with the Commission, and that parties operate only pursuant to
the terms of such agreements. Section 5(a) of the 1984 Act, 46 U.S.C.
app. 1704(a), requires that:
A true copy of every agreement entered into with respect to an
activity described in section 4(a) or (b) of this Act shall be filed
with the Commission * * *. The Commission may by regulation
prescribe the form and manner in which an agreement shall be filed
and the additional information and documents necessary to evaluate
the agreement.
Sections 10(a)(2) and 10(a)(3) of the 1984 Act, 46 U.S.C. app.
1709(a)(2) and 1709(a)(3), state that no person may:
(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.
The Commission's rules implementing these statutory provisions are
set forth at 46 CFR part 572, and, as pertinent to the issues set forth
herein, provide as follows:
46 CFR 572.103 Policies * * *
(g) An agreement filed under the Act must be clear and definite
in its terms, must embody the complete understanding of the parties,
and must set forth the specific authorities and conditions under
which the parties to the agreement will conduct their present
operations and regulate the relationships among the agreement
members.
46 CFR 572.407 Complete and Definite Agreements
(a) Any agreement required to be filed by the Act and this part
shall be the complete agreement among the parties and shall specify
in detail the substance of the understanding of the parties.
(b) Except as provided in paragraph (c) of this section,
agreement clauses which contemplate a further agreement, the terms
of which are not fully set forth in the enabling agreement, will be
permitted only if the enabling agreement indicates that any such
further agreement cannot go into effect unless filed and effective
under the Act.
(c) Further specific agreements or understandings which are
established pursuant to express enabling authority in an agreement
are considered interstitial implementation and are permitted without
further filing under section 5 of the Act only if the further
agreement concerns routine operational or administrative matters,
including the establishment of tariff rates, rules, and regulations.
Section 7(a) of the 1984 Act, 46 U.S.C. app. 1706(a), provides, as
pertinent here, that the antitrust laws of the United States do not
apply to--
(1) any agreement that has been filed under section 5 of this
Act and is effective under section 5(d) or section 6 * * *, [or]
(2) any activity or agreement within the scope of this Act,
whether permitted under or prohibited by this Act, undertaken or
entered into with a reasonable basis to conclude that (A) kit is
pursuant to an agreement on file with the Commission and in effect
when the activity took place * * *.
This broad grant of antitrust immunity necessitates careful
Commission oversight of the activities carried out pursuant to
agreements. Effective oversight could be thwarted by failure to
disclose essential elements of agreements, or by language filed with
the Commission which may not permit an assessment of an agreement's
true competitive impact.
It appears that the differences between the Hyundai/MSC filed
agreement and the MOA extend beyond routine operational or
administrative matters and provide for activities which affect
competition between the parties and with other carriers in the
transatlantic trades. In particular, it appears that the MOA, as
originally signed, effectively ties Hyundai, traditionally a non-
conference carrier, to membership in TACA for at least three years.
There is nothing in the filed agreement which would alert the
Commission or the public to this anticompetitive aspect of the slot
charter agreement.
As noted, Hyundai joined TACA effective September 11, 1995, and the
FMC agreement became effective on October 21, 1995. Thus, it appears
that Hyundai and MSC implemented at least the first part of their
unfiled agreement on conference membership, i.e. Hyundai and MSC took a
common position to membership in TACA, more than eight months prior to
its reported deletion from the MOA on May 20, 1996, and more than a
month prior to effectiveness of the FMC agreement.
In view of the above, the Commission is instituting this
investigation to determine whether Hyundai and/or MSC are violating or
have violated pertinent provisions of the 1984 Act and Commission
regulations by operating pursuant to an agreement not filed with the
Commission, the terms of which may be substantively different from
those contained in the parties' agreement which is on file with the
Commission and effective pursuant to the 1984 Act. If so, this
proceeding also shall determine whether civil penalties should be
assessed and, if so, in what amount, and whether a cease and desist
order should be issued.
Now therefore, it is ordered, that pursuant to sections 5(a),
10(a)(2), 10(a)(3), 11, and 13 of the Shipping Act of 1984 (``1984
Act''), 46 U.S.C. app. 1704(a), 1709(a)(2), 1709(a)(3), 1710, and 1712,
and the Commission's regulations set forth at 46 CFR 572.103(g), and 46
CFR 572.407, an investigation is hereby instituted to determine, with
respect to space/slot chartering in the transatlantic trades:
1. Whether Hyundai and MSC are violating or have violated section
5(a) of the 1984 Act by failing to file a true copy of an agreement
entered into with respect to an activity described in section 4(a) or
(b) of the 1984 Act, 46 U.S.C. app. 1703 (a) or (b);
2. Whether Hyundai and MSC are violating or have violated section
10(a)(2) of the 1984 Act by operating under an agreement required to be
filed under section 5 of the 1984 Act that has not become effective
under section 6 thereof;
3. Whether Hyundai and MSC are violating or have violated section
10(a)(3) of the 1984 Act by operating in a manner not in accordance
with the terms of an agreement required to be filed under section 5 of
the 1984 Act;
4. Whether Hyundai and MSC are violating or have violated 46 CFR
572.103(g) by filing an agreement with the Commission that does not
embody the complete understanding of the parties and/or does not set
forth the specific authorities and conditions under which the parties
will conduct their present operations and regulate the relationships
among the agreement members; and
5. Whether Hyundai and MSC are violating or have violated 46 CFR
572.407 by filing an agreement with the Commission that is not the
complete agreement among the parties and/or does not specify in detail
the substance of the understanding of the parties.
It is further ordered, That Huyndai and MSC are designated as
Respondents in this proceeding.
It is further ordered, That, in the event violations of the 1984
Act or the Commission's regulations are found, this proceeding shall
determine whether civil penalties should be assessed against either or
both of the Respondents and, if so, in what amounts.
It is further ordered, that, in the event violations of the 1984
Act or the
[[Page 25197]]
Commission's regulations are found, this proceeding shall determine
whether a cease and desist order should be issued against either or
both to the Respondents.
It is further Ordered, That a public hearing be held in this
proceeding and that these matters be assigned for hearing before an
Administrative Law Judge (``ALJ'') of the Commission's Office of
Administrative Law Judges at a date and place to be hereafter
determined by the ALJ 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 ALJ only after consideration has been given by the parties
and the presiding ALJ 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 the Commission's Bureau of Enforcement
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 each party 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 each party 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 20573-0001, in accordance with Rule
118 of the Commission's Rules of Practice and Procedure, 46 CFR
502.118, and shall be served on each party of record.
Finally, it is further Ordered, That in accordance with Rule 61 of
the Commission's Rules of Practice and Procedure, 46 CFR 502.61, the
initial decision of the presiding ALJ shall be issued by May 5, 1998,
and the final decision of the Commission shall be issued by September
2, 1998.
By the Commission.
Joseph C. Polking,
Secretary.
[FR Doc. 97-11998 Filed 5-7-97; 8:45 am]
BILLING CODE 6730-01-M