New legislation would strip ocean carrier antitrust protections

Date: Friday, March 4, 2022
Source: Freightwaves

Ocean carriers would no longer enjoy their limited antitrust immunity under new legislation aimed at curbing what some lawmakers and the Biden administration consider to be out-of-control market power.

The Ocean Shipping Antitrust Enforcement Act, introduced on Monday by Rep. Jim Costa, D-Calif., would amend U.S. shipping regulations by repealing section 40307 of Title 46 of the United States Code, which protects foreign carriers from certain antitrust laws.

“This bill is critical in leveling the playing field in ocean shipping,” Costa said in introducing the legislation.

“For far too long, a handful of shipping companies have controlled the ocean shipping industry and employed practices that have caused congestion and delays at American ports. If these companies are left unchecked, unfair practices will continue to harm American exporters and U.S. trade interests, which could worsen the supply chain crisis and drive up consumer prices.”

Foreign container ship companies serving the U.S. have a certain amount of antitrust immunity — not available to most other companies — in the form of rate discussion agreements and vessel sharing agreements that are intended to guard against shipping overcapacity, prevent rate wars and maintain market stability.

However, lawmakers and the administration contend that this immunity has allowed carriers to increase pricing power over shippers, particularly as supply chain disruptions have roiled the industry over the past two years.

According to Costa, applying federal antitrust laws to foreign ocean shipping companies “unties the hands of current and future administrations to take stronger actions to defend American exporters from unfair trade practices like unjustified container rate increases, exorbitant detention and demurrage fees, unexplained changes in shipping schedules, and ships leaving ports with empty containers rather than filling them with American agricultural goods.”

Building support from Biden

The proposal comes as the Federal Maritime Commission and the Department of Justice attempt to bolster enforcement of U.S. competition laws. Last week they announced an initiative, building on a memorandum of understanding signed last year, whereby the two agencies will share lawyers and economists to “aggressively enforce” Shipping Act violations.

“The attorney general and I share both the priority of a competitive marketplace and a commitment to pursue enforcement actions when necessary,” said FMC Chairman Daniel Maffei. “Our agencies have a history of cooperating to the benefit of the American consumer and this new support will help ensure that the working relationship will help both government entities in our shared goal of fair competition.”

The White House on Monday published a fact sheet promoting the agreement as a way to loosen container carrier control over the market.

“Right now, three global alliances, made up entirely of foreign companies, control almost all of ocean freight shipping, giving them power to raise prices for American businesses and consumers, while threatening our national security and economic competitiveness,” the White House stated.

The White House also underscored proposals like Costa’s to remove from federal regulations antitrust exemptions for ocean shipping, as well as related legislation such as the Ocean Shipping Reform Act, which passed the House in December and is being considered in the Senate.

“The President believes Congress should provide additional tools for the Administration to address problems in the ocean shipping industry,” the fact sheet noted. “He is calling on Congress to also address the immunity of alliance agreements from antitrust scrutiny under current law. The President is encouraged by action in both Houses of Congress to address these problems.”

Ocean carriers push back

Anticipating that Biden will include the stepped-up oversight of the ocean carrier sector in his State of the Union address Tuesday night, the World Shipping Council disputed allegations that the container shipping industry is too concentrated and uncompetitive.

The group, which represents most of the world’s container vessel capacity, pointed to data showing that competition in the U.S. actually increased in 2021 as more ships operated by a larger pool of carriers began serving the trans-Pacific trade.

“It is unfortunate that the President is demonizing ocean carriers, the industry that is the backbone of the U.S. and global economy and that has been working around the clock through the pandemic to move more cargo than at any time in history.”

[Read from the original source.]