U.S. liner carrier antitrust immunity up for debate
Among transportation and shipper lobbyists, and even some in the trade media, the debate of whether to retain or repeal liner carrier antitrust immunity was once jokingly referred to as a rite of spring.
Arguments on both side of the debate often in various congressional hearing rooms were strong, but nothing changed. Antitrust immunity, although more limited then under the 1984 Shipping Act, remains in place within the industry through the 1998 Ocean Shipping Reform Act (ORSA).
However, since the European Union Competitiveness Council’s recent adoption of the European Commission’s proposal to repeal Regulation 4056/86, which allows carrier groups to set common freight rates and cooperate on capacity, the arguments for retaining and supporting antitrust immunity for liner carriers in the U.S. trades may deteriorate.
This afternoon a federal commission will hear the pros and cons for retaining and abolishing carrier antitrust immunity from a panel of industry, government and legal experts.
From written testimony pre-submitted to the Antitrust Modernization Commission, the liner carriers and container terminal operators — represented namely by the World Shipping Council and the American Association of Port Authorities — are expected to argue that antitrust immunity helps them jointly discuss asset management to provide efficient services to shippers.
“The vast majority of all cargo arrives on time and without damage,” said Stanley Sher, an attorney representing the World Shipping Council, citing the benefits of antitrust immunity. “Capacity shortages are exceedingly rare. Even in times of peak demand, there is enough vessel capacity that cargo does not get left behind.”
“The ability of ports to meet collectively to address these challenges, with antitrust immunity under the Shipping Act, is extremely important,” said Jean Godwin, AAPA’s executive vice president and general counsel. “Ports and marine terminal operators effectively coordinate on a variety of important issues, ranging from clean air initiatives to labor allocation to the collection of fees to fund security enhancements.”
In testimony, Federal Maritime Commission Chairman Steven Blust said antitrust immunity is “mitigated by several realities,” including the rise of confidential service contracting, competition, public availability of agreements filed to the FMC, and agency enforcement.
However, among the five-person FMC commission, there’s dissent about whether to retain antitrust immunity for liner carriers. FMC Commissioner Joseph Brennan told the Antitrust Modernization Committee that “Congress should repeal antitrust immunity with respect to rate-setting and rate discussions by ocean common carriers.”
Brennan said this protection should be retained for information exchanges and space-sharing among ocean common carriers as they pertain to “enhancing efficiency.” He also believes Congress should retain limited antitrust immunity for marine terminal operators.
Representatives for the American Bar Association, American Trucking Associations, and National Customs Brokers and Forwarders Association are expected to argue against the need for antitrust immunity.
“Despite a body of theoretical support for the exemption predating OSRA, the empirical evidence concerning the deregulatory experience suggest that the (liner carrier) industry does not need horizontal collusion to perform, and that its performance indeed has been better in its deregulated state,” said Donald Klawiter, chairman of the ABA’s Section of Antitrust Law, in his written testimony.
“Moreover, the collusive conduct still permitted under the exemption continues to harm shippers and consumers, and no evidence exists of any pro-competitive upside other than the policy arguments used for years to defend the system before deregulation,” Klawiter added.
“Unfortunately, it has become all too common for the equipment providers and particularly the foreign-owned ocean carriers to make decisions that are beneficial to their operations but otherwise often add significant and unexpected costs to an intermodal shipment and the trucker, as underscored by the almost uniform increases in container related fees, per diem and reduction in terminal storage-dwell times, etc., that have been instituted across the nation’s intermodal network,” said Greg Stefflre, chief executive of Rail Delivery Services, on behalf of the ATA’s Intermodal Motor Carriers Conference.
The NCBFAA cited a case of antitrust immunity abuse by the liner carriers against non-vessel-operating common carriers in the transpacific trade in 2002. If antitrust immunity is retained, Edward Greenberg, the NCBFAA’s transportation counsel, said the FMC must have “more personnel, a larger budget and the tools necessary to be proactive and actually monitor whether parties operating pursuant to approved agreements are engaged in market-distorting behavior.”
The Antitrust Modernization Commission also invited Fabrizia Benini, the EC’s directorate general of the Competition Commission, to discuss the EC’s recent decision to abolish liner carrier antitrust immunity.
Shippers, represented through the National Industrial Transportation League, expressed disappointment with not being included to speak on the panel, but issued a prepared statement.
“Despite the benefits that have resulted from OSRA the carriers continue to hang on to the vestiges of the past by engaging in collective discussion of supply and demand in the U.S. trades via discussion agreements,” said Peter Gatti, executive vice president for the NIT League. “Therefore the league believes it is appropriate for the U.S. government in consultation with the maritime industry to undertake a review of the antitrust immunity granted under the Shipping Act.”