[Federal Register Volume 65, Number 3 (Wednesday, January 5, 2000)]
[Notices]
[Pages 461-463]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-214]


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FEDERAL MARITIME COMMISSION


Fact Finding Investigation No. 23--Ocean Common Carrier Practices 
in the Transpacific Trades; Order Discontinuing Proceeding

    On September 21, 1998, pursuant to the Shipping Act of 1984, 46 
U.S.C. app. 1701 et seq. (``Act''), the Federal Maritime Commission 
(``Commission'') commenced this nonadjudicatory fact finding proceeding 
to investigate allegations that ocean common carriers in the eastbound 
Transpacific trades were engaging in activities that may be in 
violation of certain provisions of the Act. Commissioner Delmond J.H. 
Won was appointed as Investigative Officer and was authorized to hold 
hearings and to utilize compulsory processes, including subpoenas, to 
obtain relevant testimony and documents. Commissioner Won conducted an 
expedited investigation and submitted a confidential Report and 
Recommendations (``Report'') to the Commission on January 5, 1999.
    A summary of Commissioner Won's Report was released to the public 
on March 12, 1999. Generally, as indicated by the summary, the 
Investigative Officer concluded that evidence cited in the Report 
corroborates allegations that carriers in the eastbound Transpacific 
trades, faced with shortages of space during the peak 1998 holiday 
shipping season, refused to carry low rated cargo at applicable 
contract rates, targeted the cargo of non-vessel-operating common 
carriers (``NVOCCs'') for rate and space discrimination, and imposed 
significant and sudden increases in rates and charges. Among other 
things, the Report concludes that space was allocated in many instances 
on the basis of profit to the carrier without regard to existing 
service contracts; and that bookings were often rejected unless the 
shipper agreed to significantly increased rates or charges. Large, 
reliable contract shippers were said generally to have received 
preferential space allocations.
    By order dated April 14, 1999, the Commission determined to pursue 
certain of the Report's findings through further investigation and 
enforcement action under sections 8, 10 and 11 of the Act, as 
appropriate. Accordingly, the Commission instituted a show cause 
proceeding in Docket No. 99-05, ANERA and Its Members, Opting Out of

[[Page 462]]

Service Contracts. That proceeding has now been completed with an Order 
being issued today which finds the opt out practice reflected in the 
Asia North America Eastbound Rate Agreement's (``ANERA'') 1998 service 
contracts and tariff publication in violation of section 8 of the 1984 
Act and section 514.17(c)(2) of the Commission's regulations, 46 CFR 
514.17(c)(2).
    In addition, certain issues were referred to the Commission's 
Bureau of Enforcement (``BOE'') for further investigation. To 
facilitate such further investigation, the Commission continued this 
fact finding proceeding to assist in developing additional evidence 
concerning the activities of specified ocean common carriers during the 
period July 1, 1998 to November 1, 1998 in the eastbound Transpacific 
trades. The Commission directed that the continued investigation focus 
on carrier activities involving refusal to provide vessel space or 
equipment to shippers at rates in existing service contracts; demanding 
or charging rates higher than those in applicable tariffs or service 
contracts; subjecting any particular NVOCC or NVOCC traffic generally 
to an unreasonable refusal to deal, or to undue or unreasonable 
prejudice or disadvantage, or unjustly discriminatory rates or charges; 
and transporting cargo for, or soliciting service contracts from, 
individual members of shippers' associations at rates higher than those 
found in existing contracts of the applicable associations. The 
Commission designated Vern W. Hill, Director, BOE, as the Investigative 
Officer for the continued phase of this proceeding.
    Among the matters the Commission referred to BOE for further 
enforcement action as appropriate was the failure of ANERA to file 
minutes of certain important meetings at which issues of importance to 
this fact finding investigation were discussed. On September 9, 1999, 
BOE entered into a compromise agreement with ANERA and its members 
under which a civil penalty of $55,000 was collected for failure to 
file three such minutes of conference meetings, including the meetings 
at which ANERA discussed and agreed to adopt the opt out procedure for 
service contracts.
    On October 18, 1999, the Investigative Officer submitted a 
confidential Second Report and Recommendations to the Commission, a 
summary of which is being released simultaneously with this Order. 
Among other things, the Investigative Officer recommended that this 
fact finding proceeding be terminated. He expressed confidence that any 
further need for compulsory process to support BOE's continuing 
investigations could be provided by other means.
    As the report summary indicates, the response of the shipping 
public to requests for cooperation in the ongoing investigation was 
generally disappointing. BOE, in coordination with the Investigative 
Officer, sent numerous letters soliciting further information from 
shippers and members of shippers' associations which were identified in 
carrier documents as having had problems obtaining space, or as being 
pressured to pay higher rates during last year's peak season. BOE 
contacts with numerous proprietary shippers and consignees, NVOCCs, and 
shippers' association produced few responses and little further 
evidence. Nevertheless, the wealth of information and carrier documents 
produced in the course of the initial phase of this Fact Finding 
Investigation continue to be examined for additional leads.
    Despite the failure of many shippers and other industry 
participants to respond to the Investigating Officers' invitations to 
participate in the various stages of this proceeding, the Commission 
nevertheless is convinced that the effort as a whole has had salutary 
effects. By identifying and investigating carrier behavior of concern 
to the numerous parties who complained informally to the Commission, 
the Fact Finding brought public focus and attention to these 
activities. the most egregious behavior may have been abated during the 
early stages of this proceeding. In addition, ANERA and the 
Transpacific Westbound Rate Agreement have suspended all operations 
under their agreements, including rate-setting activities and the use 
of collective service contracts. The Commission actions completed thus 
far, including the civil penalty settlement and the decision in Docket 
No. 99-05, have addressed some of the concerns that activities engaged 
in during the 1998 peak shipping season contravened carrier duties 
under the Shipping Act of 1984 and may be expected to deter similar 
future activities. The suspension of ANERA as well as changes in 
service contract practices already occurring as a result of the Ocean 
Shipping Reform Act of 1998 also render it unlikely that similar abuses 
will recur.
    The Commission has determined to adopt the Investigative Officer's 
recommendations. BOE will continue to pursue the possibility of 
enforcement action against certain ocean common carriers which have 
been identified by their own documents, as well as by a limited number 
of shippers, as refusing space or service or demanding rates higher 
than those set forth in existing service contracts. If compulsory 
process becomes necessary to support such further investigations, it 
can be provided by section 15 orders or in the context of a formal 
adjudicatory proceeding.
    Therefore, it is Ordered, That the Investigative Officer's Second 
Report and Recommendations is accepted by the Commission;
    It is Further Ordered, That the record developed in this proceeding 
shall continue to be available to the Commission's Bureau of 
Enforcement. To the extent that documents and information comprising 
this record were obtained under assurances of confidentiality, such 
documents and information will continue to be held confidential unless 
and until their use becomes necessary in an adjudicatory proceeding or 
other Commission action. BOE shall obtain authority from the Commission 
before utilizing any such document or information in a public 
proceeding or in any other manner which would disclose such documents 
or information to persons other than the person who produced it or 
Commission employees.
    It Is Further Ordered, That this non-adjudicatory investigation 
into practices of ocean common carriers in the Transpacific trades is 
discontinued; and
    It Is Further Ordered, That notice of this Order be published in 
the Federal Register.

    By the Commission.*
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    *Commissioner Joseph E. Brennan did not participate in this 
proceeding. Commissioner Delmond J.H. Won's concurring statement 
attached.
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Ronald D. Murphy,
Assistant Secretary.

Concurring Statement of Commissioner Delmond J.H. Won

    While I agree generally that the Commission's efforts in this 
proceeding has had some salutary effects, I do not share the same 
degree of confidence that my colleagues feel that our actions and 
changes wrought by OSRA will deter similar abuses from recurring.
    I had earlier expressed publicly my preference for the Commission 
to have initiated enforcement action against the carriers in their 
collective capacity rather than against individual lines only. This 
preference was based on indications that much of the behavior 
identified in the investigation--such as refusals to provide space 
under existing service contracts and discriminatory behavior directed 
toward NVOCCs--may have resulted from concerted

[[Page 463]]

actions taken by parties to agreements filed with the Commission.
    It is my opinion that the Commission's early decision to limit the 
scope of those enforcement efforts to individual, rather than concerted 
carrier activity fell short in addressing the more substantive issue 
raised in this proceeding--that being the possibility of discussion 
agreements engaging in market distorting behavior.
    I fully understand the reluctance of shipper complainants to come 
forward on the record in such enforcement proceedings, and hat this 
reluctance hampers our enforcement bureau's ability to identify and 
prosecute violations. In this case, I believe enforcement was made more 
difficult because the Commission's chosen course of action may have 
inadvertently created an impression of taking a ``hands off'' approach 
to the complaints of unreasonable, collective carrier behavior, further 
discouraging shippers from undertaking the expenses and commercial 
risks attended to the Commission's processes.
    I continue to believe that given the impact on the flow of commerce 
caused by TSA's collective behavior, more aggressive enforcement action 
on the part of the Commission would have been more appropriate.

[FR Doc. 00-214 Filed 1-4-00; 8:45 am]
BILLING CODE 6730-01-M