[Federal Register Volume 62, Number 89 (Thursday, May 8, 1997)]
[Notices]
[Pages 25193-25195]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11999]


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FEDERAL MARITIME COMMISSION

[Docket No. 97-08]


Possible Unfiled Agreements Among A.P. Moller-Maersk Line, P&O 
Nedlloyd Limited and Sea-Land Service, Inc.; Order of Investigation and 
Hearing

    On February 22, 1996, the Federal Maritime Commission 
(``Commission'' or ``FMC'') served an order pursuant to section 15 of 
the Shipping Act of 1984 (``1984 Act''), 46 U.S.C. app. 1714, upon the 
Trans-Atlantic Conference Agreement (``TACA'') and its members to 
develop facts and evidence related to a possible agreement to restrict 
the members' rights to charter space to non-conference carriers.\1\ 
Among documents received in response to that section 15 order were 
incomplete copies \2\ of an unfiled Record of Discussions (``ROD'') 
among A.P. Moller-Maersk Line (``Maersk''), P&O Containers Limited 
(``P&O''), and Sea-Land Service, Inc. (``Sea-Land'') dated August 16, 
1990. That ROD has a counterpart in FMC Agreement No. 203-011299 (``FMC 
agreement'') among the same three carriers, signed and filed with the 
Commission on August 27, 1990.\3\ Both agreements provide for slot 
chartering in the U.S. Pacific Coast/North Europe trade.
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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 follow-up with the conference and its members which was 
complete in December 1996.
    \2\ These copies do not include certain appendices and an 
addendum which are mentioned in the text of the document.
    \3\ On December 31, 1996, the FMC agreement was amended to 
change the name of P&O Containers Limited to P&O Nedlloyd Limited 
(``P&O Nedlloyd''). No other amendments to this agreement have been 
filed with the Commission.
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    While the form of the ROD and the FMC agreement are very similar, 
and both agreements are organized as required by the Commission's rules 
set forth at 46 CFR 572.403, there appear to be at least three 
substantive differences between the filed and unfiled agreements. 
First, there is a specific conference membership provision in the ROD 
which reads, in pertinent part:

    5.2  Upon effectiveness of this Agreement, the Parties are to be 
members of the USA-North Europe Rate Agreement and the North Europe-
USA Rate Agreement.\4\

    \4\ These conference were predecessors to TACA in the U.S./North 
Europe trades.
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    At the time ROD was executed, Maersk was a member of the eastbound 
USA-North Europe Rate Agreement, but had been operating as a non-
conference carrier in the westbound direction in these trades. P&O and 
Sea-Land were members of both the eastbound and westbound conferences. 
Maersk joined the westbound North Europe-USA Rate Agreement on October 
1, 1990.
    The FMC agreement, signed and filed eleven days after execution of 
the ROD, reads in pertinent part:

    5.6  The Parties shall discuss and agree on a common position as 
to their conference/non-conference status in the Trade.

    The FMC agreement became effective on October 11, 1990, ten days 
after Maersk joined the westbound North Europe-USA Rate Agreement.
    Second, the ROD contains specific authority under which Maersk will 
charter to P&O and Sea-Land a defined minimum and maximum number of 
slots on Maersk vessels to and from California ports. The ROD contains 
no agreement under which any of the parties will charter space on P&O 
or Sea-Land vessels and, in fact, it appears that P&O and Sea-Land have 
operated no vessels in this service since this slot charter became 
effective. In addition, the ROD appears to contain no authority for any 
of the parties to influence the number and size of vessels, or number 
of sailings provided by other parties.
    In contrast to this specific and limited agreement set forth in the 
ROD, the FMC agreement covers both California and U.S. Pacific 
Northwest ports and states, in pertinent part:

    5.1  The Parties may charter, exchange or otherwise make space 
and slots available to each other in such amounts, for such charter 
hire, and upon such other terms as they may from time to time agree.
    5.2  The Parties may consult and agree upon the deployment and 
utilization of their vessels in the Trade, including, without 
limitation, their sailing schedules, service frequency, ports to be 
serviced, port rotation, determining which vessels they will operate 
and adding or withdrawing vessels from the Trade.
    5.3  The Parties may agree upon the number and type of vessels 
to be operated by each party in the Trade. The Parties may charter 
vessels to and from each other, or from other persons, for use in 
the Trade on such terms as they may from time to time agree. The 
maximum number of vessels to be operated hereunder, without further 
amendment, is 25, each vessel having a maximum size of 4,500 TEU's.

    The third notable difference is related to the second, and is 
consistent with the conversion of the one-way slot charter agreed to in 
the ROD into a reciprocal space charter arrangement for filing 
purposes. The FMC agreement provides that the parties may discuss and 
agree upon the use of terminal facilities, may jointly negotiate and 
enter into leases of such facilities, and may jointly contract for 
stevedoring, terminal, or other related ocean and shoreside services 
and supplies, and may operate joint equipment maintenance and repair 
facilities and joint equipment pools. There appears to be no such 
authority in the ROD.
    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 the 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 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.

[[Page 25194]]

    (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.

    In view of the differences between the ROD and the FMC agreement 
among Maersk, P&O (now P&O Nedlloyd) and Sea-Land, which appear to 
extend beyond routine operational or administrative matters and concern 
activities which affect competition in the U.S. Pacific Coast/North 
Europe trade, the Commission questions whether the FMC agreement is the 
true and complete agreement or agreements among the parties. Neither 
the ROD nor subsequent operations by the parties indicate that the 
parties agreed to, or have engaged in, reciprocal space chartering in 
this trade. It appears, instead, that P&O and Sea-Land may have 
terminated direct vessel service to and from certain U.S. Pacific coast 
ports in connection with this charter of space on Maersk vessels.\5\ 
Thus, the FMC agreement may not reveal the true competitive impact of 
the parties' arrangements. Moreover, there is nothing in the FMC 
agreement which would indicate that the parties had already entered 
into and implemented a specific agreement under which Maersk became a 
member of the North Europe-USA Rate Agreement.
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    \5\ Prior to this agreement with Maersk, P&O and Sea-Land 
apparently provided service in this trade on vessels operated in 
conjunction with Hapag-Lloyd AG, Container Line AB, and Compagnie 
Generale Maritime.
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    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) it 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.
    In view of the above, the Commission is instituting this 
investigation to determine whether Maersk, P&O Nedlloyd and/or Sea-Land 
are violating or have violated pertinent provisions of the 1984 Act and 
Commission regulations by operating pursuant to an agreement or 
agreements 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 U.S. Pacific Coast/North Europe 
trade:
    1. Whether Maersk, P&O Nedlloyd and Sea-Land are violating or have 
violated section 5(a) of the 1984 Act by failing to file a true copy of 
any 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 Maersk, P&O Nedlloyd and Sea-Land are violating or have 
violated section 10(a)(2) of the 1984 Act by operating under any 
agreement required to be filed under section 5 of the 1984 Act that has 
not become effective under section 6 thereof;
    3. Whether Maersk, P&O Nedlloyd and Sea-Land 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 Maersk, P&O Nedllyod and Sea-Land 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 Maersk, P&O Nedllyod and Sea-Land 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 Maersk, P&O Nedlloyd and Sea-Land 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 any of the 
Respondents and, if so, in what amounts.
    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 a cease and desist order should be issued against any 
or all of 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 solved 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

[[Page 25195]]

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 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. 97-11999 Filed 5-7-97; 8:45 am]
BILLING CODE 6730-01-M