[Federal Register Volume 69, Number 168 (Tuesday, August 31, 2004)]
[Notices]
[Pages 53068-53070]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-19773]


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FEDERAL MARITIME COMMISSION

[Docket No. 04 -10]


Agreement No. 201158; Docking and Lease Agreement by and Between 
City of Portland, Maine and Scotia Prince Cruises Limited; Order of 
Investigation and Hearing

    Agreement No. 201158 is a ``docking and lease agreement'' between 
the city of Portland, Maine (``Portland''), a municipal corporation 
organized under the laws of Maine, and Scotia Prince Cruises Limited 
(``Scotia Prince''), a Bermuda corporation. Under the Agreement, 
effective this date, Scotia Prince leases certain docking and terminal 
facilities from Portland for purposes of operating a daily passenger 
and passenger vehicle service between Portland and Yarmouth, Nova 
Scotia.
    Ordinarily, a docking and lease agreement would be classified as a 
``marine terminal facilities agreement'' exempt by regulation from the 
filing and waiting period requirements of section 5 of the Shipping Act 
of 1984, as amended (``Shipping Act''), 46 U.S.C. app. Sec.  1704. See 
46 CFR Sec.  535.311. Agreement No. 201158, however, contains exclusive 
use and non-compete provisions which cause it to be classified as a 
cooperative working agreement under section 4(b)(2) of the Act, 46 U.S. 
app. 1705(b)(2). Specifically, in sections 15 and 16 of the Agreement, 
Portland has agreed not to grant to any other operator permission to 
use its terminal premises for passenger or passenger vehicle service to 
or from Portland during Scotia Prince's scheduled season.\1\ In return, 
Scotia Prince has agreed not to operate or participate in the operation 
of any competitive passenger or passenger vehicle service operating 
between any New England port and any port in Nova Scotia.
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    \1\ Approximately May 1-October 31.
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    The effect of sections 15 and 16 of the agreement is to grant 
Scotia Prince a monopoly on passenger and passenger vehicle service 
between Portland, Maine and all ports in Nova Scotia, including 
Yarmouth. At the same time, Portland is protected from possible 
competition from Scotia Prince at nearby Portsmouth, NH, Bar Harbor, ME 
or any other New England port. Inclusion of these restrictive 
provisions in an otherwise routine agreement raises serious concerns 
under section 10(d) of the Shipping Act, 46 U.S,C. app. 1709(d). 
Section 10(d)provides, as pertinent:
    (1) No common carrier, ocean transportation intermediary, or marine 
terminal operator may fail to establish, observe, and enforce just and 
reasonable regulations and practices relating to or connected with 
receiving, handling, storing, or delivering property.
    (2) No marine terminal operator may agree with another marine 
terminal operator or with a common carrier to boycott, or unreasonably 
discriminate in the provision of terminal services to, any common 
carrier or ocean tramp.
    (3) The prohibitions in subsections (b)(10) and (13)of this section 
apply to marine terminal operators.
    (4) No marine terminal operator may give any undue or unreasonable 
preference or advantage or impose any undue or unreasonable prejudice 
or disadvantage with respect to any person.
    The restrictions on competitive service at Portland may also 
contravene section 10(b)(10), made applicable to marine terminal 
operators by section 10(d)(3), which makes it unlawful to 
``unreasonably refuse to deal or negotiate.''

Background

    Scotia Prince's service to Portland is provided by the M/V Scotia 
Prince, a 485 foot cruise vessel which accommodates approximately 1200 
passengers and 200 vehicles. The Scotia Prince, which was extensively 
renovated in 2003, offers passengers restaurant dining, a casino, a 
caf[eacute] and bars, live entertainment, duty free shopping, a 
skydeck, and a massage and beauty spa, among other amenities. Overnight 
berths for 1,054 are provided in 174 cabins and staterooms.
    The Scotia Prince operates on a daily basis carrying passengers and 
passenger vehicles between Portland and Yarmouth in southern Nova 
Scotia. The vessel departs Portland each evening, sails overnight and 
arrives at Yarmouth the next morning, eleven hours later. After an hour 
in port to disembark and embark passengers and vehicles, the Scotia 
Prince sails for Portland, arriving in the early evening. Approximately 
153,000 passengers were boarded in 2003.\2\
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    \2\ Scotia Prince Cruises is separately regulated by the 
Commission as a passenger vessel operator under 46 CFR part 540.

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[[Page 53069]]

    Portland is a municipal corporation which operates the Port of 
Portland under the authority and control of the Portland City Council. 
Portland has recently undertaken to construct a new ``International 
Passenger and Ferry Terminal'' and has committed $17 million dollars of 
public money to do so. It is the intention of the parties to relocate 
Scotia Prince's operation to the new terminal and to continue to apply 
the exclusive use provisions in sections 15 and 16, applicable to all 
terminal facilities in Portland, after the relocation.\3\
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    \3\ Docking and Lease Extension 2 between Portland and 
Scotia Prince Cruises Limited, p. 2, January 3, 2004.
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    In response to the Federal Register publication of Agreement No. 
201158, Bay Ferries Limited (``Bay Ferries'') submitted comments 
objecting to certain provisions of the agreement, specifically sections 
15 and 16. Bay Ferries is a Canadian corporation, headquartered in 
Charlottetown, Prince Edward Island, which provides transportation of 
passengers and passenger vehicles between Bar Harbor, Maine, and 
Yarmouth, Nova Scotia. Bay Ferries' service is provided by ``The Cat,'' 
a 300 foot, high speed catamaran which accommodates 875 passengers and 
250 vehicles, including busses and oversized vehicles. The Cat has no 
berths or cabins and offers relatively modest amenities. It makes the 
crossing from Bar Harbor to Yarmouth in about three hours, including 
port time.
    Bay Ferries has expressed its desire to provide passenger and 
passenger vehicle service between Portland and Yarmouth, has met with 
Portland officials, and has indicated it is prepared to introduce 
service utilizing its existing catamaran with an intermediary call at 
Bar Harbor. Bay Ferries anticipates providing service between Portland 
and Yarmouth, with an intermediary call at Bar Harbor, in 4.5 hours.

Discussion

    Exclusive arrangements which foreclose competition, such as those 
created by sections 15 and 16 of Agreement No. 201158, have been 
considered in a number of Commission decisions and are generally viewed 
as contrary to this nation's pro-competitive policies. In Petchem, Inc. 
v. Canaveral Port Authority, 23 S.R.R. 974, 988 (1986), we stated:

    The exclusive arrangement between the Port Authority and Hvide 
is prima facie unreasonable because it is contrary to the general 
policies of the United States favoring competition, which fact 
obligates Respondents to justify the arrangement.

    As we have recognized, however, the Shipping Act of 1984, like the 
Shipping Act, 1916, does ``not forbid all preferential or prejudicial 
treatment; only that which is undue or unreasonable.'' Id., quoting 
A.P. St. Philip v. Atlantic Land & Improvement Co. et al, 13 F.M.C. 
167, 174 (1969). After discussing the decision in Agreement No. T-2598, 
17 F.M.C. 286 (1974), where the parties successfully justified an 
exclusive terminal and stevedoring arrangement, we held in Petchem, 
supra:

    In sum, the appropriate standard for judging exclusive terminal 
arrangements under the Shipping Acts is a synthesis of the St. 
Philip and Agreement T-2598 decisions. Such arrangements are 
generally undesirable and, in the absence of justification by their 
proponents, may be unlawful under the Shipping Acts. However, in 
certain circumstances, such arrangements may be necessary to provide 
adequate and consistent service to a port's carriers or shippers, to 
ensure attractive prices for such services and generally to advance 
the port's economic well-being. Id., at 990.

    While an exclusive arrangement may be justified under appropriate 
circumstances, we noted with approval the ALJ's affirmation that ``the 
greater the degree of preference or monopoly, the greater the 
evidentiary burden of justification.'' All Marine Moorings v. ITO Corp. 
of Baltimore, 27 S.R.R. 539, 545 (1996).
    A refusal ``to deal or negotiate'' is, in and of itself, not a 
violation of the Shipping Act. We must determine whether the refusal 
was unreasonable or whether it may have been justified by particular 
circumstances in effect. In Petchem, Inc. v. Federal Maritime 
Commission, 853 F.2d 558, 563 (D.C. Cir. 1988), the Court of Appeals 
recognized that ``[t]he Shipping Act contemplates the existence of 
permissible preferences or prejudices.'' The Commission's analysis in 
Seacon Terminals, Inc. v. Port of Seattle, 26 S.R.R 886 (1993), 
indicates that whether a marine terminal operator gave good faith 
consideration to an entity's proposal or efforts at negotiation is 
central to determining whether a refusal to deal or negotiate was 
reasonable.
    In view of the above, an evidentiary investigation is necessary to 
determine whether the City of Portland and/or Scotia Prince Cruises is 
in violation of sections 10(b)(10) and 10(d)(1)-(4) of the Shipping Act 
by entering into and operating under a restrictive working arrangement 
which negatively impacts competition for passenger and passenger vessel 
service in the trade between Portland and Nova Scotia.
    Now Therefore, It Is Ordered that, pursuant to sections 
10(b)(10),10(d)(1)-(4), 11, and 13 of the Shipping Act, 46 U.S.C. app. 
1709(b)(10), 1709(d)(1)-(4), 1710, and 1712, an investigation is hereby 
instituted to determine:
    (1) Whether the Port of Portland and/or Scotia Prince Cruises, 
alone or in conjunction with one another, have violated sections 
10(b)(10) and 10(d)(3) of the Shipping Act by entering into an 
agreement whereby the Port of Portland unreasonably refuses to deal or 
negotiate with other providers of passenger and passenger vehicle 
transportation;
    (2) Whether the Port of Portland and/or Scotia Prince Cruises, 
alone or in conjunction with one another, have violated sections 
10(b)(10) and 10(d)(3) of the Shipping Act by entering into an 
agreement whereby Scotia Prince Cruises unreasonably refuses to deal or 
negotiate with ports in New England other than Portland;
    (3) Whether the Port of Portland has violated section 10 (d)(1) of 
the Shipping Act by failing to establish, observe and enforce just and 
reasonable regulations and practices relating to or connected with 
receiving, handling, storing or delivering property;
    (4) Whether the Port of Portland and Scotia Prince Cruises have 
violated section 10(d)(2) of the Shipping Act by agreeing to boycott or 
unreasonably discriminate in the provision of terminal services to a 
common carrier;
    (5) Whether the Port of Portland has violated section 10(d)(4) of 
the Shipping Act by providing Scotia Prince Cruises with an undue and 
unreasonable preference or advantage;
    (6) Whether, in the event violations of sections 10(b) and 10(d) of 
the Shipping Act are found, civil penalties should be assessed against 
the Port of Portland and Scotia Prince Cruises and, if so, in what 
amount; and
    (7) Whether, in the event such violations are found, the Port of 
Portland and Scotia Prince Cruises should be ordered to cease and 
desist from practices and agreements which are in violation of sections 
10(b)(10) and 10(d)(1)-(4) of the Shipping Act.
    It Is Further Ordered, that the Port of Portland and Scotia Prince 
Cruises Limited are designated as respondents in this proceeding;
    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

[[Page 53070]]

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, 
including but not limited to mediation pursuant to 46 CFR 502.91, 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 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 August 23, 
2005, and the final decision of the Commission shall be issued by 
December 21, 2005.

    By the Commission.
Bryant L. VanBrakle,
Secretary.
[FR Doc. 04-19773 Filed 8-30-04; 8:45 am]
BILLING CODE 6730-01-P