Date: Tuesday, July 13, 2021
The Federal Maritime Commission and the antitrust division of the Department of Justice have signed an agreement to sharpen economic oversight of foreign ocean carriers serving in the U.S. international container trades.
The first-ever memorandum of understanding between the two agencies, signed on Monday, follows President Joe Biden’s executive order issued on Friday aimed at curbing potential anticompetitive behavior among 72 industries, including the maritime and freight rail sectors.
“The Federal Maritime Commission has an important enforcement role as an economic regulator of a vital industry,” said FMC Chairman Daniel Maffei in a statement. “As such, we will continually assess how the agency can improve its capacity to protect the integrity of the marketplace. This memorandum … supplements and strengthens the FMC’s ability to detect, address, and pursue violations of the law or anticompetitive behavior by those we regulate.”
The partnership with the FMC, according to Acting Assistant Attorney General Richard Powers, “is one of the many ways in which the Antitrust Division is prepared to play its role in achieving the competition objectives of the President’s Competition Executive Order.”
While the agreement is not legally binding and can be terminated by either agency, it is a sign that the Biden administration is taking seriously complaints by U.S. exporters and lawmakers’ allegations against the container lines of overcharging on rates, unreasonable fees and refusals of service in favor of more lucrative imports.
The MOU establishes a framework for the DOJ’s antitrust division and the FMC to oversee regulations that affect maritime competition. “The agencies will confer at least once annually to discuss and review law enforcement, regulatory, and other matters related to competitive conditions in the industry,” the agreement states. It also provides for exchange of information and expertise relevant to the agencies’ oversight and enforcement responsibilities.
The World Shipping Council (WSC), which represents 90% of global container-carrier capacity, has disputed allegations of anticompetitive behavior.
“The industry remains competitive by any measure, and the current situation is not caused by any lack of competition. There are over 50 ocean carriers operating more than 1,000 ships that provide some 180 liner services to U.S. importers and exporters,” the group asserted in a statement issued following Biden’s executive order.
“Price movements in this market are driven by supply and demand and are the result of a competitive market. Even though deployed vessel capacity on the transpacific is at an all-time high, with all available ships carrying cargo, the huge and sustained increase in U.S. imports has physically overwhelmed the available capacity and has resulted in a surge in pricing.”
WSC noted that before the pandemic nominal rates were flat — and in real terms were decreasing when corrected for inflation.
“The structure and level of concentration in the container shipping market has not changed during the pandemic. If anything, carrier actions show a well-functioning market with low barriers to entry: new services have been launched, new carriers have entered the market, and the amount of vessel orders in the first half of the year surpasses 2019 and 2020 combined, reaching the highest level in 20 years.”