FMC Issues Section 15 Order on Rates and Service in U.S.-Australia/New Zealand Trade
The Federal Maritime Commission has issued a Section 15 Order to certain vessel operating common carriers (VOCCs)1 as it is concerned that the combined effect of their activities under certain U.S.-Australia/New Zealand agreements may have the effect of reducing competition in a manner that may affect prices and service to an unreasonable extent or may otherwise be violative of the Shipping Act of 1984.
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(Section 15 of the Shipping Act allows the FMC to require any common carrier to file any periodical or special report or any account, record, rate, etc. pertaining to the business of that common carrier, among other things.)
FMC Seeks Information to Determine if Agreements Decrease Service, Increase Transportation Costs
The FMC is seeking information and documents, on or before approximately October 25, 2008, from the carrier members of the (1) U.S. Pacific Coast-Oceania Agreement (OVSA); (2) U.S./Australasia Discussion Agreement (USADA), (3) Australia and New Zealand-U.S. Discussion Agreement (ANZUSDA) and (4) other carriers in the trade to assist the FMC in determining whether the agreements, by a reduction in competition, have, or are likely to, result in an unreasonable decrease in service or an unreasonable increase in transportation costs within the meaning of Section 6(g) of the Shipping Act (i.e., whether they are substantially anticompetitive.)
Lack of Alternatives, Overlapping Membership, Exchange of Information, Etc.
The FMC states that there are few providers of direct services in the U.S.-Australia/New Zealand trade, and all of them are members of OVSA. Alternate sources of services for shippers and consignees in this trade are limited.
In addition, two related rate discussion agreements, USADA (southbound trade) and ANZUSDA (northbound trade), cover the same geographic scope, and their memberships include the members of the OVSA agreement.
According to the FMC, pursuant to existing agreement authority, OVSA members exchange information and discuss and agree on schedules for services, vessel sharing and space and capacity allocations through meetings and information exchanges.
Members Have Extraordinary Ability to Affect Supply, Pricing, Capacity
The FMC states that viewed in conjunction with the USADA and the ANZUSDA rate discussion agreements, the OVSA members have an extraordinary ability to affect the supply and pricing of ocean liner service in the trade.
FMC adds that collectively, these agreements provide virtually complete control over capacity in the market while simultaneously providing authority to agree on rates in the trade through participation in rate discussion agreements.
FMC Could Enjoin the Agreements' Operation in Part or in Whole
The FMC states that if warranted, it may seek to enjoin, in whole or in part, the operation of these agreements pursuant to section 6(h) of the Shipping Act of 1984.
(Section 6(h) allows the FMC, upon making a determination that an agreement is substantially anticompetitive, to bring a suit in the U.S. District Court for the District of Columbia to enjoin operation of the agreement. The court may issue a temporary restraining order or preliminary injunction and, upon a showing that the agreement is likely, by a reduction in competition, to produce an unreasonable reduction in transportation service or an unreasonable increase in transportation cost, may enter a permanent injunction.)
1The VOCCs include: Maersk Line, Hamburg Sud, Hapag Lloyd, CMA CGM (operating as ANL-USL), ANL Singapore PTE Ltd, Marfret, and Wallenius Wilhelmsen.
FMC Section 15 Order (dated 08/26/08) available at http://www.fmc.gov/UserFiles/pages/File/Section_15_Order.pdf