[Federal Register Volume 62, Number 89 (Thursday, May 8, 1997)]
[Notices]
[Pages 25193-25195]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11999]
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FEDERAL MARITIME COMMISSION
[Docket No. 97-08]
Possible Unfiled Agreements Among A.P. Moller-Maersk Line, P&O
Nedlloyd Limited and Sea-Land Service, Inc.; Order of Investigation and
Hearing
On February 22, 1996, the Federal Maritime Commission
(``Commission'' or ``FMC'') served an order pursuant to section 15 of
the Shipping Act of 1984 (``1984 Act''), 46 U.S.C. app. 1714, upon the
Trans-Atlantic Conference Agreement (``TACA'') and its members to
develop facts and evidence related to a possible agreement to restrict
the members' rights to charter space to non-conference carriers.\1\
Among documents received in response to that section 15 order were
incomplete copies \2\ of an unfiled Record of Discussions (``ROD'')
among A.P. Moller-Maersk Line (``Maersk''), P&O Containers Limited
(``P&O''), and Sea-Land Service, Inc. (``Sea-Land'') dated August 16,
1990. That ROD has a counterpart in FMC Agreement No. 203-011299 (``FMC
agreement'') among the same three carriers, signed and filed with the
Commission on August 27, 1990.\3\ Both agreements provide for slot
chartering in the U.S. Pacific Coast/North Europe trade.
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\1\ This section 15 order was addressed to TACA and its
seventeen member lines. Responses were submitted in May 1996, and
required follow-up with the conference and its members which was
complete in December 1996.
\2\ These copies do not include certain appendices and an
addendum which are mentioned in the text of the document.
\3\ On December 31, 1996, the FMC agreement was amended to
change the name of P&O Containers Limited to P&O Nedlloyd Limited
(``P&O Nedlloyd''). No other amendments to this agreement have been
filed with the Commission.
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While the form of the ROD and the FMC agreement are very similar,
and both agreements are organized as required by the Commission's rules
set forth at 46 CFR 572.403, there appear to be at least three
substantive differences between the filed and unfiled agreements.
First, there is a specific conference membership provision in the ROD
which reads, in pertinent part:
5.2 Upon effectiveness of this Agreement, the Parties are to be
members of the USA-North Europe Rate Agreement and the North Europe-
USA Rate Agreement.\4\
\4\ These conference were predecessors to TACA in the U.S./North
Europe trades.
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At the time ROD was executed, Maersk was a member of the eastbound
USA-North Europe Rate Agreement, but had been operating as a non-
conference carrier in the westbound direction in these trades. P&O and
Sea-Land were members of both the eastbound and westbound conferences.
Maersk joined the westbound North Europe-USA Rate Agreement on October
1, 1990.
The FMC agreement, signed and filed eleven days after execution of
the ROD, reads in pertinent part:
5.6 The Parties shall discuss and agree on a common position as
to their conference/non-conference status in the Trade.
The FMC agreement became effective on October 11, 1990, ten days
after Maersk joined the westbound North Europe-USA Rate Agreement.
Second, the ROD contains specific authority under which Maersk will
charter to P&O and Sea-Land a defined minimum and maximum number of
slots on Maersk vessels to and from California ports. The ROD contains
no agreement under which any of the parties will charter space on P&O
or Sea-Land vessels and, in fact, it appears that P&O and Sea-Land have
operated no vessels in this service since this slot charter became
effective. In addition, the ROD appears to contain no authority for any
of the parties to influence the number and size of vessels, or number
of sailings provided by other parties.
In contrast to this specific and limited agreement set forth in the
ROD, the FMC agreement covers both California and U.S. Pacific
Northwest ports and states, in pertinent part:
5.1 The Parties may charter, exchange or otherwise make space
and slots available to each other in such amounts, for such charter
hire, and upon such other terms as they may from time to time agree.
5.2 The Parties may consult and agree upon the deployment and
utilization of their vessels in the Trade, including, without
limitation, their sailing schedules, service frequency, ports to be
serviced, port rotation, determining which vessels they will operate
and adding or withdrawing vessels from the Trade.
5.3 The Parties may agree upon the number and type of vessels
to be operated by each party in the Trade. The Parties may charter
vessels to and from each other, or from other persons, for use in
the Trade on such terms as they may from time to time agree. The
maximum number of vessels to be operated hereunder, without further
amendment, is 25, each vessel having a maximum size of 4,500 TEU's.
The third notable difference is related to the second, and is
consistent with the conversion of the one-way slot charter agreed to in
the ROD into a reciprocal space charter arrangement for filing
purposes. The FMC agreement provides that the parties may discuss and
agree upon the use of terminal facilities, may jointly negotiate and
enter into leases of such facilities, and may jointly contract for
stevedoring, terminal, or other related ocean and shoreside services
and supplies, and may operate joint equipment maintenance and repair
facilities and joint equipment pools. There appears to be no such
authority in the ROD.
The 1984 Act and the Commission's regulations are explicit in
requiring that a true and complete copy of every applicable agreement
be filed with the Commission, and that the parties operate only
pursuant to the terms of such agreements. Section 5(a) of the 1984 Act,
46 U.S.C. app. 1704(a), requires that:
A true copy of every agreement entered into with respect to an
activity described in section 4 (a) or (b) of this Act shall be
filed with the Commission. * * * The Commission may by regulation
prescribe the form and manner in which an agreement shall be filed
and the additional information and documents necessary to evaluate
the agreement.
Sections 10(a)(2) and 10(a)(3) of the 1984 Act, 46 U.S.C. app.
1709(a)(2) and 1709(a)(3), state that no person may:
(2) operate under an agreement required to be filed under
section 5 of this Act that has not become effective under section 6,
or that has been rejected, disapproved, or canceled; or
(3) operate under an agreement required to be filed under
section 5 of this Act except in accordance with the terms of the
agreement or any modifications made by the Commission to the
agreement.
The Commission's rules implementing these statutory provisions are
set forth at 46 CFR part 572, and, as pertinent to the issues set forth
herein, provide as follows:
46 CFR 572.103 Policies * * *
(g) An agreement filed under the Act must be clear and definite
in its terms, must embody the complete understanding of the parties,
and must set forth the specific authorities and conditions under
which the parties to the agreement will conduct their present
operations and regulate the relationships among the agreement
members.
46 CFR 572.407 Complete and definite agreements
(a) Any agreement required to be filed by the Act and this part
shall be the complete agreement among the parties and shall specify
in detail the substance of the understanding of the parties.
(b) Except as provided in paragraph (c) of this section,
agreement clauses which contemplate a further agreement, the terms
of which are not fully set in the enabling agreement, will be
permitted only if the enabling agreement indicates that any such
further agreement cannot go into effect unless filed and effective
under the Act.
[[Page 25194]]
(c) Further specific agreements or understandings which are
established pursuant to express enabling authority in an agreement
are considered interstitial implementation and are permitted without
further filing under section 5 of the Act only if the further
agreement concerns routine operational or administrative matters,
including the establishment of tariff rates, rules, and regulations.
In view of the differences between the ROD and the FMC agreement
among Maersk, P&O (now P&O Nedlloyd) and Sea-Land, which appear to
extend beyond routine operational or administrative matters and concern
activities which affect competition in the U.S. Pacific Coast/North
Europe trade, the Commission questions whether the FMC agreement is the
true and complete agreement or agreements among the parties. Neither
the ROD nor subsequent operations by the parties indicate that the
parties agreed to, or have engaged in, reciprocal space chartering in
this trade. It appears, instead, that P&O and Sea-Land may have
terminated direct vessel service to and from certain U.S. Pacific coast
ports in connection with this charter of space on Maersk vessels.\5\
Thus, the FMC agreement may not reveal the true competitive impact of
the parties' arrangements. Moreover, there is nothing in the FMC
agreement which would indicate that the parties had already entered
into and implemented a specific agreement under which Maersk became a
member of the North Europe-USA Rate Agreement.
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\5\ Prior to this agreement with Maersk, P&O and Sea-Land
apparently provided service in this trade on vessels operated in
conjunction with Hapag-Lloyd AG, Container Line AB, and Compagnie
Generale Maritime.
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Section 7(a) of the 1984 Act, 46 U.S.C. app. 1706(a), provides, as
pertinent here, that the antitrust laws of the United States do not
apply to--
(1) Any agreement that has been filed under section 5 of this
Act and is effective under section 5(d) or section 6 * * *, [or]
(2) Any activity or agreement within the scope of this Act,
whether permitted under or prohibited by this Act, undertaken or
entered into with a reasonable basis to conclude that (A) it is
pursuant to an agreement on file with the Commission and in effect
when the activity took place.
This broad grant of antitrust immunity necessitates careful
Commission oversight of the activities carried out pursuant to
agreements. Effective oversight could be thwarted by failure to
disclose essential elements of agreements, or by language filed with
the Commission which may not permit an assessment of an agreement's
true competitive impact.
In view of the above, the Commission is instituting this
investigation to determine whether Maersk, P&O Nedlloyd and/or Sea-Land
are violating or have violated pertinent provisions of the 1984 Act and
Commission regulations by operating pursuant to an agreement or
agreements not filed with the Commission, the terms of which may be
substantively different from those contained in the parties' agreement
which is on file with the Commission and effective pursuant to the 1984
Act. If so, this proceeding also shall determine whether civil
penalties should be assessed and, if so, in what amount, and whether a
cease and desist order should be issued.
Now therefore, it is ordered, That pursuant to sections 5(a),
10(a)(2), 10(a)(3), 11, and 13 of the Shipping Act of 1984 (``1984
Act''), 46 U.S.C. app. 1704(a), 1709(a)(2), 1709(a)(3), 1710, and 1712,
and the Commission's regulations set forth at 46 CFR 572.103(g), and 46
CFR 572.407, an investigation is hereby instituted to determine, with
respect to space/slot chartering in the U.S. Pacific Coast/North Europe
trade:
1. Whether Maersk, P&O Nedlloyd and Sea-Land are violating or have
violated section 5(a) of the 1984 Act by failing to file a true copy of
any agreement entered into with respect to an activity described in
section 4(a) or (b) of the 1984 Act, 46 U.S.C. app. 1703(a) or (b);
2. Whether Maersk, P&O Nedlloyd and Sea-Land are violating or have
violated section 10(a)(2) of the 1984 Act by operating under any
agreement required to be filed under section 5 of the 1984 Act that has
not become effective under section 6 thereof;
3. Whether Maersk, P&O Nedlloyd and Sea-Land are violating or have
violated section 10(a)(3) of the 1984 Act by operating in a manner not
in accordance with the terms of an agreement required to be filed under
section 5 of the 1984 Act;
4. Whether Maersk, P&O Nedllyod and Sea-Land are violating or have
violated 46 CFR 572.103(g) by filing an agreement with the Commission
that does not embody the complete understanding of the parties and/or
does not set forth the specific authorities and conditions under which
the parties will conduct their present operations and regulate the
relationships among the agreement members; and
5. Whether Maersk, P&O Nedllyod and Sea-Land are violating or have
violated 46 CFR 572.407 by filing an agreement with the Commission that
is not the complete agreement among the parties and/or does not specify
in detail the substance of the understanding of the parties.
It is further ordered, That Maersk, P&O Nedlloyd and Sea-Land are
designated as Respondents in this proceeding.
It is further ordered, That, in the event violations of the 1984
Act or the Commission's regulations are found, this proceeding shall
determine whether civil penalties should be assessed against any of the
Respondents and, if so, in what amounts.
It is further ordered, That, in the event violations of the 1984
Act or the Commission's regulations are found, this proceeding shall
determine whether a cease and desist order should be issued against any
or all of the Respondents.
It is further ordered, That a public hearing be held in this
proceeding and that these matters be assigned for hearing before an
Administrative Law Judge (``ALJ'') of the Commission's Office of
Administrative Law Judges at a date and place to be hereafter
determined by the ALJ in compliance with Rule 61 of the Commission's
Rules of Practice and Procedure, 46 CFR 502.61. The hearing shall
include oral testimony and cross-examination in the discretion of the
presiding ALJ only after consideration has been given by the parties
and the presiding ALJ to the use of alternative forms of dispute
resolution, and upon a proper showing that there are genuine issues of
material fact that cannot be solved on the basis of sworn statements,
affidavits, depositions, or other documents or that the nature of the
matters in issue is such that an oral hearing and cross-examination are
necessary for the development of an adequate record.
It is further ordered, That the Commission's Bureau of Enforcement
is designated a party to this proceeding.
It is further ordered, That notice of this Order be published in
the Federal Register, and a copy be served on each party of record.
It is further ordered, That other persons having an interest in
participating in this proceeding may file petitions for leave to
intervene in accordance with Rule 72 of the Commission's Rules of
Practice and Procedure, 46 CFR 502.72.
It is further ordered, That all further notices, orders, and/or
decisions issued by or on behalf of the Commission in this proceeding,
including notice of the time and place of hearing or prehearing
conference, shall be served on each party of record.
It is further ordered, That all documents submitted by any party of
record in this proceeding shall be
[[Page 25195]]
directed to the Secretary, Federal Maritime Commission, Washington, DC
20573-0001, in accordance with Rule 118 of the Commission's Rules of
Practice and Procedure, 46 CFR 502.118, and shall be served on each
party of record.
Finally, it is ordered, That in accordance with Rule 61 of the
Commission's Rules of Practice and Procedure, 46 CFR 502.61, the
initial decision of the presiding ALJ shall be issued by May 5, 1998,
and the final decision of the Commission shall be issued by September
2, 1998.
By the Commission.
Joseph C. Polking,
Secretary.
[FR Doc. 97-11999 Filed 5-7-97; 8:45 am]
BILLING CODE 6730-01-M
