[Federal Register Volume 65, Number 3 (Wednesday, January 5, 2000)]
[Notices]
[Pages 461-463]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-214]
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FEDERAL MARITIME COMMISSION
Fact Finding Investigation No. 23--Ocean Common Carrier Practices
in the Transpacific Trades; Order Discontinuing Proceeding
On September 21, 1998, pursuant to the Shipping Act of 1984, 46
U.S.C. app. 1701 et seq. (``Act''), the Federal Maritime Commission
(``Commission'') commenced this nonadjudicatory fact finding proceeding
to investigate allegations that ocean common carriers in the eastbound
Transpacific trades were engaging in activities that may be in
violation of certain provisions of the Act. Commissioner Delmond J.H.
Won was appointed as Investigative Officer and was authorized to hold
hearings and to utilize compulsory processes, including subpoenas, to
obtain relevant testimony and documents. Commissioner Won conducted an
expedited investigation and submitted a confidential Report and
Recommendations (``Report'') to the Commission on January 5, 1999.
A summary of Commissioner Won's Report was released to the public
on March 12, 1999. Generally, as indicated by the summary, the
Investigative Officer concluded that evidence cited in the Report
corroborates allegations that carriers in the eastbound Transpacific
trades, faced with shortages of space during the peak 1998 holiday
shipping season, refused to carry low rated cargo at applicable
contract rates, targeted the cargo of non-vessel-operating common
carriers (``NVOCCs'') for rate and space discrimination, and imposed
significant and sudden increases in rates and charges. Among other
things, the Report concludes that space was allocated in many instances
on the basis of profit to the carrier without regard to existing
service contracts; and that bookings were often rejected unless the
shipper agreed to significantly increased rates or charges. Large,
reliable contract shippers were said generally to have received
preferential space allocations.
By order dated April 14, 1999, the Commission determined to pursue
certain of the Report's findings through further investigation and
enforcement action under sections 8, 10 and 11 of the Act, as
appropriate. Accordingly, the Commission instituted a show cause
proceeding in Docket No. 99-05, ANERA and Its Members, Opting Out of
[[Page 462]]
Service Contracts. That proceeding has now been completed with an Order
being issued today which finds the opt out practice reflected in the
Asia North America Eastbound Rate Agreement's (``ANERA'') 1998 service
contracts and tariff publication in violation of section 8 of the 1984
Act and section 514.17(c)(2) of the Commission's regulations, 46 CFR
514.17(c)(2).
In addition, certain issues were referred to the Commission's
Bureau of Enforcement (``BOE'') for further investigation. To
facilitate such further investigation, the Commission continued this
fact finding proceeding to assist in developing additional evidence
concerning the activities of specified ocean common carriers during the
period July 1, 1998 to November 1, 1998 in the eastbound Transpacific
trades. The Commission directed that the continued investigation focus
on carrier activities involving refusal to provide vessel space or
equipment to shippers at rates in existing service contracts; demanding
or charging rates higher than those in applicable tariffs or service
contracts; subjecting any particular NVOCC or NVOCC traffic generally
to an unreasonable refusal to deal, or to undue or unreasonable
prejudice or disadvantage, or unjustly discriminatory rates or charges;
and transporting cargo for, or soliciting service contracts from,
individual members of shippers' associations at rates higher than those
found in existing contracts of the applicable associations. The
Commission designated Vern W. Hill, Director, BOE, as the Investigative
Officer for the continued phase of this proceeding.
Among the matters the Commission referred to BOE for further
enforcement action as appropriate was the failure of ANERA to file
minutes of certain important meetings at which issues of importance to
this fact finding investigation were discussed. On September 9, 1999,
BOE entered into a compromise agreement with ANERA and its members
under which a civil penalty of $55,000 was collected for failure to
file three such minutes of conference meetings, including the meetings
at which ANERA discussed and agreed to adopt the opt out procedure for
service contracts.
On October 18, 1999, the Investigative Officer submitted a
confidential Second Report and Recommendations to the Commission, a
summary of which is being released simultaneously with this Order.
Among other things, the Investigative Officer recommended that this
fact finding proceeding be terminated. He expressed confidence that any
further need for compulsory process to support BOE's continuing
investigations could be provided by other means.
As the report summary indicates, the response of the shipping
public to requests for cooperation in the ongoing investigation was
generally disappointing. BOE, in coordination with the Investigative
Officer, sent numerous letters soliciting further information from
shippers and members of shippers' associations which were identified in
carrier documents as having had problems obtaining space, or as being
pressured to pay higher rates during last year's peak season. BOE
contacts with numerous proprietary shippers and consignees, NVOCCs, and
shippers' association produced few responses and little further
evidence. Nevertheless, the wealth of information and carrier documents
produced in the course of the initial phase of this Fact Finding
Investigation continue to be examined for additional leads.
Despite the failure of many shippers and other industry
participants to respond to the Investigating Officers' invitations to
participate in the various stages of this proceeding, the Commission
nevertheless is convinced that the effort as a whole has had salutary
effects. By identifying and investigating carrier behavior of concern
to the numerous parties who complained informally to the Commission,
the Fact Finding brought public focus and attention to these
activities. the most egregious behavior may have been abated during the
early stages of this proceeding. In addition, ANERA and the
Transpacific Westbound Rate Agreement have suspended all operations
under their agreements, including rate-setting activities and the use
of collective service contracts. The Commission actions completed thus
far, including the civil penalty settlement and the decision in Docket
No. 99-05, have addressed some of the concerns that activities engaged
in during the 1998 peak shipping season contravened carrier duties
under the Shipping Act of 1984 and may be expected to deter similar
future activities. The suspension of ANERA as well as changes in
service contract practices already occurring as a result of the Ocean
Shipping Reform Act of 1998 also render it unlikely that similar abuses
will recur.
The Commission has determined to adopt the Investigative Officer's
recommendations. BOE will continue to pursue the possibility of
enforcement action against certain ocean common carriers which have
been identified by their own documents, as well as by a limited number
of shippers, as refusing space or service or demanding rates higher
than those set forth in existing service contracts. If compulsory
process becomes necessary to support such further investigations, it
can be provided by section 15 orders or in the context of a formal
adjudicatory proceeding.
Therefore, it is Ordered, That the Investigative Officer's Second
Report and Recommendations is accepted by the Commission;
It is Further Ordered, That the record developed in this proceeding
shall continue to be available to the Commission's Bureau of
Enforcement. To the extent that documents and information comprising
this record were obtained under assurances of confidentiality, such
documents and information will continue to be held confidential unless
and until their use becomes necessary in an adjudicatory proceeding or
other Commission action. BOE shall obtain authority from the Commission
before utilizing any such document or information in a public
proceeding or in any other manner which would disclose such documents
or information to persons other than the person who produced it or
Commission employees.
It Is Further Ordered, That this non-adjudicatory investigation
into practices of ocean common carriers in the Transpacific trades is
discontinued; and
It Is Further Ordered, That notice of this Order be published in
the Federal Register.
By the Commission.*
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*Commissioner Joseph E. Brennan did not participate in this
proceeding. Commissioner Delmond J.H. Won's concurring statement
attached.
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Ronald D. Murphy,
Assistant Secretary.
Concurring Statement of Commissioner Delmond J.H. Won
While I agree generally that the Commission's efforts in this
proceeding has had some salutary effects, I do not share the same
degree of confidence that my colleagues feel that our actions and
changes wrought by OSRA will deter similar abuses from recurring.
I had earlier expressed publicly my preference for the Commission
to have initiated enforcement action against the carriers in their
collective capacity rather than against individual lines only. This
preference was based on indications that much of the behavior
identified in the investigation--such as refusals to provide space
under existing service contracts and discriminatory behavior directed
toward NVOCCs--may have resulted from concerted
[[Page 463]]
actions taken by parties to agreements filed with the Commission.
It is my opinion that the Commission's early decision to limit the
scope of those enforcement efforts to individual, rather than concerted
carrier activity fell short in addressing the more substantive issue
raised in this proceeding--that being the possibility of discussion
agreements engaging in market distorting behavior.
I fully understand the reluctance of shipper complainants to come
forward on the record in such enforcement proceedings, and hat this
reluctance hampers our enforcement bureau's ability to identify and
prosecute violations. In this case, I believe enforcement was made more
difficult because the Commission's chosen course of action may have
inadvertently created an impression of taking a ``hands off'' approach
to the complaints of unreasonable, collective carrier behavior, further
discouraging shippers from undertaking the expenses and commercial
risks attended to the Commission's processes.
I continue to believe that given the impact on the flow of commerce
caused by TSA's collective behavior, more aggressive enforcement action
on the part of the Commission would have been more appropriate.
[FR Doc. 00-214 Filed 1-4-00; 8:45 am]
BILLING CODE 6730-01-M
