Justice supports NVO service contract, tariff publishing to FMC
The U.S. Justice Department’s Antitrust Division has put its support behind recent non-vessel-operating common carrier petitions to the Federal Maritime Commission calling for the ability to arrange confidential service contracts with shippers and to abolish the requirement for tariff publishing.
Under the 1998 Ocean Shipping Reform Act, NVOs were excluded from developing confidential service contracts with shippers, while this privilege was extended to vessel-operating common carriers. In addition, the tariff publishing requirement remained in effect for NVOs.
United Parcel Service filed a petition with the FMC in late July calling for “contract parity” with liner carriers for its NVO service. Other NVOs, such as BAX Global, C.H. Robinson Worldwide and Ocean World Line, followed by filing similar petitions with the agency. The National Customs Brokers and Forwarders Association of America also filed a petition calling for the end of tariff publishing for NVOs.
Justice said in its comments to the FMC that it supported the “common intent of these petitions, which is to permit more entities to compete with VOCCs on an equal footing.”
Justice added: “When regulatory barriers that confront one class of actual or potential rivals are removed, competition is enhanced. The department believes that exempting all NVOCCs from all tariff-publication requirements would produce the greatest competitive benefits.”
Justice told the FMC that “prohibiting NVOCCs from entering into service contracts denies them comparable competitive opportunities to increase their efficiency by working with shippers to negotiate service contracts that reduce carriers’ costs and meet the shippers’ specific needs.
“Reducing the number of service contract competitors may be particularly harmful to smaller shippers, for which NVOCCs may be more efficient providers,” the department said.
Justice said tariff publication regulations “reduce competition, waste resources, and harm commerce in the U.S. liner trades.”
The department referred to an American Shipper study, pointed out in the NCBFAA petition, which found the association members’ shippers are rarely interested in tariffs and that about 5 percent of NVO administrative costs are associated with tariff publication. Access to tariff information may also put NVOs at a competitive disadvantage with the liner carriers, Justice said.
“Unfortunately, the current regulations, which give VOCCs access to the competitively sensitive information in NVOCC’s tariffs, make it easier and cheaper for VOCCs to discipline NVOCCs that compete,” Justice said.
The department doesn’t accept the argument that tariff publication protects shippers from shoddy NVO services.
“Shippers that compete in global markets are sophisticated business organizations, not ill-informed private citizens. They can check the financial condition of their transportation providers and make informed decisions on whether to rely on a carrier’s commitments,” the department said. “The competitive harm created by denying shippers the opportunity to enter into confidential service contracts with NVOCCs outweighs any possible pro-consumer benefits that might be realized by saving shippers from themselves.”
Justice said shippers have suffered from their share of liner carrier bankruptcies, “leaving shippers’ containers strewn around the globe.”
Justice also supports the elimination of liner carrier antitrust immunity under OSRA, which allows these operators to discuss transportation pricing issues. The department endorsed the proposed Fair Market Antitrust Immunity (FAIR) Act, introduced by Rep. Henry Hyde, R-Ill., in 2001, and the reintroduction of the bill by Rep. F. James Sensenbrenner, R-Wis., the following year. An industry coalition is attempting to resurrect the FAIR Act legislation once again.