[Federal Register Volume 60, Number 193 (Thursday, October 5, 1995)]
[Notices]
[Pages 52208-52212]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24750]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Lykes Bros. Steamship Co., Inc.; Proposed Final
Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation, and Competitive Impact Statement have been filed with the
United States District Court for the District of Columbia in United
States v. Lykes Bros. Steamship Co., Inc., Civil No. 95-CV01839 as to
Lykes Bros. Steamship Co., Inc.
The Complaint alleges that the defendant and Universal Shippers
Association entered into a contract containing an automatic rate
differential clause, which required defendant to charge competing
shippers of wine and spirits from Europe to the United States rates for
ocean transportation services that were at least 5% higher than
[[Page 52209]]
Universal's for any lesser volume of cargo. This clause required
maintenance of a 5% differential in favor of Universal at all times,
thereby placing shippers who compete with Universal at a competitive
disadvantage.
The proposed Final Judgment enjoins the defendant from maintaining,
agreeing to, or enforcing an automatic rate differential clause in any
of its individual contracts, and also requires the defendant to
establish an antitrust compliance program.
Public comment on the proposed Final Judgment is invited within the
statutory 60-day comment period. Such comments and responses thereto
will be published in the Federal Register and filed with the Court.
Comments should be directed to Roger W. Fones, Chief, Transportation,
Energy and Agriculture Section, Room 9104, U.S. Department of Justice,
Antitrust Division, 555 Fourth Street, NW., Washington, DC 20001
(telephone: 202/307-6351).
Rebecca P. Dick,
Deputy Director, Office of Operations, Antitrust Division.
[Civil Action No.: 1:CV01839] Judge Gladys Kessler
United States of America, Plaintiff, v. Lykes Bros. Steamship
Co., Inc., Defendant.
Stipulation
It is stipulated by and between the undersigned parties, by their
respective attorneys that:
1. The Court has jurisdiction over the subject matter of this
action and over each of the parties thereto, and venue of this action
is proper in the District of Columbia;
2. The parties consent that a Final Judgment in the form hereto
attached may be filed and entered by the Court, upon the motion of any
party or upon the Court's own motion, at any time after compliance with
the requirements of the Antitrust Procedures and Penalties Act (15
U.S.C. 16), and without further notice to any party or other
proceedings, provided that Plaintiff has not withdrawn its consent,
which it may do at any time before the entry of the proposed Final
Judgment by serving notice thereof on Defendants and by filing that
notice with the Court;
3. In the event Plaintiff withdraws its consent or if the proposed
Final Judgment is not entered pursuant to this Stipulation, this
Stipulation shall be of no effect whatsoever, and the making of this
Stipulation shall be without prejudice to any party in this or in any
other proceeding.
This ____ day of September, 1995.
For the Plaintiff, United States of America:
Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section.
Donna N. Kooperstein,
Assistant Chief, Transportation, Energy and Agriculture Section.
Michele B. Felasco,
Attorney, Transportation, Energy and Agriculture Section.
For the Defendant, Lykes Bros. Steamship Co., Inc.:
Andrew K. Macfarlane, Esquire,
Macfarlane Ausley Ferguson & McMullen.
Final Judgment
Plaintiff, United States of America, filed its Complaint on
September 26, 1995 United States of America and Lykes Bros. Steamship
Co., Inc., by their respective attorneys, have consented to the entry
of this final Judgment without trial or adjudication of any issue of
fact or law. This Final Judgment shall not be evidence against nor an
admission by any party with respect to any issue of fact or law.
Therefore, before the taking of any testimony and without trial or
adjudication of any issue of fact or law herein, and upon consent of
the parties, it is hereby
Ordered, Adjudged, and Decreed, as follows:
I.
Jurisdiction
This Court has jurisdiction over the subject matter of this action
and over each of the parties consenting hereto. The Complaint states a
claim upon which relief may be granted against the defendant under
Section 1 of the Sherman Act, 15 U.S.C. 1.
II.
Definitions
As used herein, the term:
(A) ``automatic rate differential clause'' means any provision in a
contract that requires the defendant, as an ocean common carrier, to
maintain a differential in rates, whether expressed as a percentage or
as a specific amount, between rates charged by defendant to the shipper
under the contract and rates charged by defendant to any other
similarly situated shippers of the same commodities for lesser volumes.
(B) ``contract'' means any contract for the provision of ocean
liner transportation services, including a service contract.
``Contract'' does not include any contract for charter services or for
ocean common carriage provided at a tariff rate filed pursuant to 46
U.S.C. App. Sec. 1707.
(C) ``conference'' means an association of ocean common carriers
permitted, pursuant to an approved or effective agreement, to engage in
concerted activity and to utilize a common tariff in accordance with 46
U.S.C. App. Sec. 1701, et seq.
(D) ``conference contract'' means a contract between a conference
and a shipper.
(E) ``defendant'' means Lykes Brothers Steamship Co., Inc., each of
its predecessors, successors, divisions, and subsidiaries, each other
person directly or indirectly, wholly or in part, owned or controlled
by it, and each partnership or joint venture to which any of them is a
party, and all present and former employees, directors, officers,
agents, consultants or other persons acting for or on behalf of any of
them.
(F) ``individual contract'' means a contract between a shipper and
defendant in its capacity as an individual ocean common carrier and not
in its capacity as a conference member.
(G) ``service contract'' means any contract between a shipper and
an ocean common carrier or conference in which the shipper makes a
commitment to provide a certain minimum quantity of cargo over a fixed
time period, and the ocean common carrier or conference commits to a
certain rate or rate schedule as well as a defined service level.
(H) ``shipper'' means the owner of cargo transported or the person
for whose account the ocean transportation of cargo is provided or the
person to whom delivery of cargo is made; ``shipper'' also means any
group of shippers, including a shippers' association.
(I) ``shippers' association'' means a group of shippers that
consolidates or distributes freight on a nonprofit basis for the
members of the group in order to secure carload, truckload, or other
volumes rates or service contracts.
III.
Applicability
(A) This Final Judgment applies to the defendant and to each of its
subsidiaries, successors, assigns, officers, directors, employees, and
agents.
(B) Nothing contained herein shall suggest that any portion of this
Final Judgment is or has been created for the benefit of any third
party and nothing herein shall be construed to provide any rights to
any third party.
IV.
Prohibited Conduct
Defendant is restrained and enjoined from maintaining, adopting,
agreeing to,
[[Page 52210]]
abiding by, or enforcing an automatic rate differential clause in any
individual contract.
V.
Nullification and Limiting Conditions
(A) Nullification
(1) Any automatic rate differential clause in any of defendant's
individual contracts shall be null and void by virtue of this Final
Judgment. Promptly upon entry of this Final Judgment, defendant shall
notify in writing each shipper with whom defendant has an individual
contract containing an automatic rate differential clause that this
Final Judgment prohibits such clause.
(B) Limiting Conditions
(1) Nothing in this Final Judgment shall affect any conference
contracts to which defendant is a party pursuant to defendant's
membership in a conference agreement.
(2) Nothing in this Final Judgment shall limit defendant's ability
to participate in any conference contract that contains an automatic
rate differential clause.
(3) Nothing in this Final Judgment shall prevent defendant from
entering a contract to maintain, for any single voyage, a differential
in rates between the rates charged by defendant to the shipper under
the contract and the rates charged by defendant to another shipper that
has contracted for a single shipment on the same voyage.
VI.
Compliance Measures
Defendant is ordered:
(A) To send, promptly upon entry of this Final Judgment, a copy of
this Final Judgment to each shipper whose individual contract contains
an automatic rate differential clause;
(B) To send a copy of this Final Judgment to each shipper that
requests an automatic rate differential clause;
(C) To maintain an antitrust compliance program which shall include
the following:
(1) Designating within 30 days of entry of this Final Judgment, an
Antitrust Compliance Officer with responsibility for accomplishing the
antitrust compliance program and with the purpose of achieving
compliance with this Final Judgment. The Antitrust Compliance Officer
shall, on a continuing basis, supervise the review of the current and
proposed activities of defendant to ensure that it complies with this
Final Judgment.
(2) The Antitrust Compliance Officer shall be responsible for
accomplishing the following activities:
(a) Distributing copies of this Final Judgment in accordance with
Sections VI(A) and VI(B) above; and
(b) Distributing, upon entry of this Final Judgment, a copy of this
Final Judgment to all officers and employees with responsibility for
negotiating contracts with shippers, overseeing compliance with such
contracts, or shipper relations.
(c) Briefing annually defendant's Board of Directors, Executive
Committee, officers, and non-clerical employees on this Final Judgment
and the antitrust laws.
VII.
Certification
(A) Within 75 days after the entry of this Final Judgment, the
defendant shall certify to the plaintiff that it has complied with
Sections V and VI(A) above, designated an Antitrust Compliance Officer,
and distributed the Final Judgment in accordance with Sections VI(B)
and VI(C) above.
(B) For each year of the term of this Final Judgment, the defendant
shall file with the plaintiff, on or before the anniversary date of
entry of this Final Judgment, a statement as to the fact and manner of
its compliance with the provisions of Sections V and VI above.
VIII.
Plaintiff Access
(A) To determine or secure compliance with this Final Judgment and
for no other purpose, duly authorized representatives of the plaintiff
shall, upon written request of the Assistant Attorney General in charge
of the Antitrust Division, and on reasonable notice to the defendant
made to its principal office, be permitted, subject to any legally
recognized privilege:
(1) Access during the defendant's office hours to inspect and copy
all documents in the possession or under the control of the defendant,
who may have counsel present, relating to any matters contained in this
Final Judgment; and
(2) Subject to the reasonable convenience of the defendant and
without restraint or interference from it, to interview officers,
employees or agents of the defendant, who may have counsel present,
regarding such matters.
(B) Upon the written request of the Assistant Attorney General in
charge of the Antitrust Division made to the defendant's principal
office, the defendant shall submit such written reports, under oath if
requested, relating to any matters contained in this Final Judgment as
may be reasonably requested, subject to any legally recognized
privilege.
(C) No information or documents obtained by the means provided in
Section VIII shall be divulged by the plaintiff to any person other
than a duly authorized representative of the Executive Branch of the
United States, except in the course of legal proceedings to which the
United States is a party, or for the purpose of securing compliance
with this Final Judgment, or as otherwise required by law.
(D) If at the time information or documents are furnished by the
defendant to plaintiff, the defendant represents and identifies in
writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(7) of the Federal
Rules of Civil Procedure, and defendant marks each pertinent page of
such material, ``Subject to claim of protection under Rule 26(c)(7) of
the Federal Rules of Civil Procedure,'' then 10 days notice shall be
given by plaintiff to defendant prior to divulging such material in any
legal proceeding (other than a grand jury proceeding) to which
defendant is not a party.
IX.
Further Elements of the Final Judgment
(A) This Final Judgment shall expire five years from the date of
entry, provided that, before the expiration of this Final Judgment,
plaintiff, after consultation with defendant, and in plaintiff's sole
discretion, may extend the Final Judgment for an additional five years.
(B) Jurisdiction is retained by this Court for the purpose of
enabling the parties to this Final Judgment to apply to this Court at
any time for further orders and directions as may be necessary or
appropriate to carry out or construe this Final Judgment, to modify or
terminate any of its provisions, to enforce compliance, and to punish
violations of its provisions.
(C) Entry of this Final Judgment is in the public interest.
Dated:
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United States District Judge
Case Number: 1:95CV01839.
Judge: Gladys Kessler.
Deck Type: Antitrust.
Date Stamp: 09/26/95.
Competitive Impact Statement
Pursuant to Section 2(b) of the Antitrust Procedures and Penalties
Act,
[[Page 52211]]
15 U.S.C. Sec. 16(b)-(h), the United States submits this Competitive
Impact Statement relating to the proposed Final Judgment submitted for
entry against and with the consent of defendant Lykes Bros. Steamship
Co., Inc. (``Lykes'') in this civil proceeding.
I
Nature and Purpose of the Proceeding
On September 26, 1995, the United States filed a civil antitrust
Complaint alleging that Lykes Bros. Steamship Co., Inc. (``Lykes'')
entered into an agreement with a shippers' association that
unreasonably restrains competition by restraining discounting of rates
for ocean transportation services in violation of Section 1 of the
Sherman Act, 15 U.S.C. Sec. 1.
On the same date, the United States and Lykes filed a Stipulation
by which they consented to the entry of a proposed Final Judgment
designed to undo the challenged agreement and prevent any recurrence of
such agreements in the future.
Entry of the proposed Final Judgment will terminate this action,
except that the Court will retain jurisdiction over the matter for any
further proceedings that may be required to interpret, enforce or
modify the Judgment or to punish violations of any of its provisions.
II.
Practices Giving Rise to the Alleged Violation
Defendant Lykes is a Louisiana corporation with its principal place
of business in Tampa, Florida. Lykes is an ocean common carrier that
provides ocean transportation services for cargo worldwide, including
services in the North Atlantic trade between the United States and
Northern Europe. In 1994, Lykes' vessel operating revenues totaled
approximately $625 million.
Prices in the ocean shipping industry are not set in a vigorously
competitive market. The ocean shipping industry is comprised of both
conference and independent ocean common carriers. A conference is a
legal cartel of ocean common carriers; its members receive immunity
from the antitrust laws (46 U.S.C. App.Sec. 1701, et seq., ``1984
Shipping Act'') to agree on prices and engage in other otherwise
illegal concerted activity. There are over 15 carriers that serve the
North Atlantic trade between the United States and Europe, but the
majority of these are members of the Trans-Atlantic Conference
Agreement (``TACA''). TACA is a conference that has received antitrust
immunity to jointly fix prices and limit capacity in the North Atlantic
trade. Their prices are set forth in tariffs filed with the Federal
Maritime Commission (``FMC'') and are available to all customers (who
are called ``shippers''). Defendant Lykes is not a member of TACA. It
operates as an independent carrier in the North Atlantic, offering
transportation services to all shippers at tariff prices that it sets
independently. In trades with a significant conference, such as the
North Atlantic trade, independents as well as the conference possess
some degree of market power over freight rates because there are
relatively few separate sellers.
Under the 1984 Shipping Act, independent carriers or conferences
may enter into service contracts with shippers or shippers'
associations. A shippers' association is a group of shippers that
consolidates or distributes freight for its members on a nonprofit
basis in order to secure volume discounts. In a service contract, a
shipper or shippers' association commits to provide a certain minimum
quantity of cargo over a fixed period, and the ocean carrier or
conference commits to a certain price schedule based on that volume.
Service contract prices are typically lower than the tariff prices.\1\
\1\ Independent carriers and conferences may also enter into
service contracts with non-vessel operating common carriers
(``NVOCCs''). An NVOCC offers transportation services to shippers
but does not operate the vessels. NVOCCs typically consolidate the
freight of small shippers and then arrange for carriage of the
consolidated freight.
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Universal Shippers Association (``Universal'') is a shippers'
association composed of member shippers' associations and large
independent distillers that ship their own products. Universal accounts
for about half of the wine and spirits carried across the North
Atlantic. Universal entered into a service contract with Lykes on or
about October 26, 1993 (effective through December 31, 1995), for the
ocean transportation of wine and spirits from Northern Europe to the
United States. The Lykes/Universal contract contained the following
``automatic rate differential clause'':
Carrier guarantees that rates and charges in this Contract shall
at all times be at least 5% lower than any other tariff, Time Volume
or other service contract rates for similar commodities at a lesser
volume and essentially similar transportation service. As necessary,
Carrier shall reduce rates/charges in this Contract as necessary to
honor this guarantee, promptly informing the Association and the
FMC.
This clause requires Lykes to charge competing shippers or shippers'
associations that purchase lesser volumes than Universal a rate that is
at least 5% higher than Universal's.
Other shippers and shippers' associations compete with Universal
and its members for importing wines and spirits into the United States.
Universal's competitors seek to minimize their costs by, inter alia,
obtaining the lowest possible rates for the ocean transportation of
wine and spirits. But the automatic rate differential clause limits
Lykes' incentive to offer to Universal's competitors transportation
rates as favorable as Lykes could otherwise offer. To comply with the
clause, Lykes must either offer these shippers prices that are at least
5% higher than the prices in Universal's service contract, or it must
lower Universal's price for all of Universal's service contract
shipments in order to maintain the 5% differential. The latter is not
an attractive alternative for Lykes, given Universal's volume. And in
either case, Universal's competitors pay prices 5% higher than
Universal--regardless of Lykes' cost of providing them with
transportation--which adversely affects their ability to compete with
Universal.
Where there are few separate sellers, as is the case here, an
automatic rate differential clause in effect places a tax on the
buyer's competitors. There is a danger that this tax will protect the
buyer from competition from firms whose costs may otherwise be lower
than its own, thus erecting barriers to competition. It is the raising
of these barriers to competition with Universal, which already has a
substantial market presence, that constitutes the unreasonable
restraint of trade in this case.
III.
Explanation of the Proposed Final Judgment
The Plaintiff and Lykes have stipulated that the Court may enter
the proposed Final Judgment after compliance with the Antitrust
Procedures and Penalties Act, 15 U.S.C. Sec. 16(b)-(h). The proposed
Final Judgment provides that its entry does not constitute any evidence
against or admission of any party concerning any issue of fact or law.
Under the provisions of Section 2(e) of the Antitrust Procedures
and Penalties Act 15 U.S.C. Sec. 16(e), the proposed Final Judgment may
not be entered unless the Court finds that entry is in the public
interest. Section IX(C) of the proposed Final Judgment sets forth such
a finding.
[[Page 52212]]
The proposed Final Judgment is designed to eliminate the automatic
differential clause from defendant's individual contracts for the
provision of ocean liner transportation services with shippers or
shippers' associations. Under Section IV of the proposed Final
Judgment, Lykes is restrained and enjoined from maintaining, adopting,
agreeing to, abiding by, or enforcing an automatic rate differential
clause in any contract when acting in its capacity as an independent
carrier. Section IX of the proposed Final Judgment provides for an
initial term of five years, which the United States in its sole
discretion may extend up to five additional years. Section V(A)
nullifies any automatic rate differential clauses currently in effect
in any of Lykes' contracts as an independent ocean carrier.
The proposed Final Judgment does not affect any contracts of any
conference in which Lykes is member, and it does not limit Lykes'
ability to participate in any conference contracts that contain such a
clause. Section V(B)(1-2).
Section VI of the proposed Final Judgment requires Lykes to send a
copy of the Final Judgment to each shipper whose contract with Lykes,
as an independent carrier, contains an automatic rate differential
clause, and to send a copy of the Final Judgment to any other shipper
or shippers' association that requests an automatic rate differential
clause. Section VI also obligates Lykes to maintain an antitrust
compliance program that meets the obligations specified in Section
VI(C). The Final Judgment also contains provisions, in Section VII,
obligating Lykes to certify its compliance with specified obligations
of Sections V and VI of the Final Judgment. In addition, Section VIII
of the Final Judgment sets forth a series of measures by which the
plaintiff may have access to information needed to determine or secure
Lykes' compliance with the Final Judgment.
The relief in the proposed Final Judgment removes the contractual
clause that requires Lykes to place in essence a 5% ``tax'' on the
shipping costs of Universal's competitors. It restores to Universal's
competitors the ability to compete for the lowest shipping prices.
IV.
Alternative to the Proposed Final Judgment
The alternative to the proposed Final Judgment would be a full
trial on the merits of the case. In the view of the Department of
Justice, such a trial would involve substantial costs to both the
United States and Lykes and is not warranted because the proposed Final
Judgment provides relief that will fully remedy the violations of the
Sherman Act alleged in the United States' Complaint.
V.
Remedies Available to Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damage suffered, as well as costs and reasonable attorney's fees.
Entry of the proposed Final Judgment will neither impair nor assist in
the bringing of such actions. Under the provisions of Section 5(a) of
the Clayton Act, 15 U.S.C. Sec. 16(a), the proposed Final Judgment has
no prima facie effect in any subsequent action that may be brought
against the defendant in this matter.
VI.
Procedures Available for Modification of the Proposed Final Judgment
As provided by the Antitrust Procedures and Penalties Act, any
person believing that the proposed Judgment should be modified may
submit written comments to Roger W. Fones, Chief; Transportation,
Energy, and Agriculture Section; Department of Justice; Antitrust
Division; Judiciary Center Building, Room 9104; 55 Fourth Street, N.W.;
Washington, D.C. 20001, within the 60-day period provided by the Act.
Comments received, and the Government's responses to them, will be
filed with the Court and published in the Federal Register. All
comments will be given due consideration by the Department of Justice,
which remains free, pursuant to Paragraph 2 of the Stipulation, to
withdraw its consent to the proposed Final Judgment at any time before
its entry if the Department should determine that some modification of
the Judgment is warranted in the public interests. The proposed
Judgment itself provides that the Court will retain jurisdiction over
this action, and that the parties may apply to the Court for such
orders as may be necessary or appropriate for the modification,
interpretation, or enforcement of the Judgment.
VII.
Determinative Documents
No materials and documents of the type described in Section 2(b) of
the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b), were
considered in formulating the proposed Judgment, consequently, none are
filed herewith.
Dated: September 26, 1995.
Respectfully submitted,
Michele B. Felasco,
Attorney, Antitrust Division, Department of Justice.
[FR Doc. 95-24750 Filed 10-4-95; 8:45 am]
BILLING CODE 4410-01-M
