[Federal Register Volume 61, Number 171 (Tuesday, September 3, 1996)]
[Notices]
[Pages 46484-46488]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22274]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Universal Shippers Association, Inc.; Proposed
Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16(b)-(h), that a proposed Final
Judgment, Stipulation, and Competitive Impact Statement have been filed
with the United States District Court for the Eastern District of
Virginia in United States v. Universal Shippers Association, Inc.,
Civil No. 96-1154-A as to Universal Shippers Association, Inc.
The Complaint alleges that the defendant and Lykes Bros. Steamship
Co., Inc. entered into a contract containing an ``automatic rate
differential clause,'' which required Lykes 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
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 contracts, and also requires 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, Suite 500, U.S. Department of Justice,
Antitrust Division, 325 Seventh Street, N.W., Washington, D.C. 20530
(telephone: 202/307-6351).
Rebecca P. Dick,
Deputy Director, Office of Operations, Antitrust Division.
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 Eastern District of Virginia;
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. Sec. 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 22nd day of August, 1996.
[[Page 46485]]
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. Cano,
Attorney, Transportation, Energy and Agriculture Section.
Dennis E. Szybala,
Assistant United States Attorney V.S.B. # 22785.
For the Defendant Universal Shippers Association, Inc.:
Ronald N. Cobert, Esquire,
Grove, Jaskiewicz and Cobert, Suite 400, 1730 M Street, N.W.,
Washington, D.C. 20036-4579.
Final Judgment
Plaintiff, United States of America, filed its Complaint on August
22, 1996. United States of America and Universal Shippers Association,
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. Sec. 1.
II
Definitions
As used herein, the term:
(A) Automatic rate differential clause means any provision in a
contract the defendant has with an ocean common carrier or conference
that requires the ocean common carrier or conference to maintain a
differential in rates, whether expressed as a percentage or as a
specific amount, between rates charged by the ocean common carrier or
conference to the defendant under the contract and rates charged by the
ocean common carrier or conference to any other shipper of the same or
competing 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) Defendant means Universal Shippers Association, 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.
(E) 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.
(F) 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.
(G) 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
volume 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.
IV
Prohibited Conduct
Defendant is restrained and enjoined from maintaining, adopting,
agreeing to, abiding by, or enforcing an automatic rate differential
clause in any contract.
V
Nullification
Any automatic rate differential clause in any of defendant's
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 ocean common carrier or conference with whom defendant has
a contract containing an automatic rate differential clause that this
Final Judgment prohibits such clause.
VI
Compliance Measures
Defendant is ordered:
(A) To send, promptly upon entry of this Final Judgment, a copy of
this Final Judgment to each ocean common carrier or conference whose
contract with defendant contains an automatic rate differential clause;
(B) To provide a copy of this Final Judgment to each director and
officer at the time they take office, and to those employees that
negotiate contracts, and to maintain a record or log of signatures of
those persons that they received, read, understand to the best of their
ability, and agree to abide by this Final Judgment and that they have
been advised and understand that noncompliance with the Final Judgment
may result in disciplinary measures and also may result in conviction
of the person for criminal contempt of court;
(C) To maintain an antitrust compliance program which shall include
an annual briefing of the defendant's Board of Directors, officers and
non-clerical employees on this Final Judgment and the antitrust laws.
VII
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
[[Page 46486]]
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.
VIII
Further Elements of the Final Judgment
(A) This Final Judgment shall expire ten years from the date of
entry.
(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
Competitive Impact Statement
Pursuant to Section 2(b) of the Antitrust Procedures and Penalties
Act, 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 Universal
Shippers Association, Inc. (``Universal'') in this civil proceeding.
I
Nature and Purpose of the Proceeding
On August 22, 1996, the United States filed a civil antitrust
Complaint alleging that Universal Shippers Association, Inc.
(``Universal'') entered into an agreement with an ocean common carrier
that unreasonably restrains competition 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 Universal 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 Universal is a Delaware corporation with its principal
place of business in Bedford, Virginia. A shippers' association is a
group of ocean transportation customers (``shippers'') that
consolidates or distributes freight for its members on a nonprofit
basis in order to secure volume discounts. Universal is itself a
shippers' association and is 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.
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 shippers. Lykes
Bros. Steamship Co., Inc. (``Lykes'') is not a member of TACA. 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. 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. 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\
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\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 entered into a service contract with Lykes on or about
October 26, 1993, 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
[[Page 46487]]
spirits. But the automatic rate differential clause limited 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 Universal 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 VIII(C) of the proposed Final Judgment sets forth
such a finding.
The proposed Final Judgment is designed to eliminate the automatic
differential clause from defendant's contracts for the provision of
ocean liner transportation services with ocean common carriers or
conferences. Under Section IV of the proposed Final Judgment, Universal
is restrained and enjoined from maintaining, adopting, agreeing to,
abiding by, or enforcing an automatic rate differential clause in any
contract with an ocean common carrier or conference. Section VIII(A) of
the proposed Final Judgment provides for a term of ten years. Section V
nullifies any automatic rate differential clauses currently in effect
in any of Universal's contracts with an ocean common carrier or
conference.
Section VI(A) of the proposed Final Judgment requires Universal to
send a copy of the Final Judgment to each ocean common carrier whose
contract with Universal contains an automatic rate differential clause.
Section IV(B) requires Universal to provide a copy of the Final
Judgment to each director and officer at the time they take office, and
to those employees that negotiate contracts for the provision of ocean
liner transportation services, and to maintain a record and log of
those signatures that they received, read, understand, and agree to
abide by the Final Judgment. Section VI also obligates Universal to
maintain an antitrust compliance program that meets the obligations
specified in Section VI(C). In addition, Section VII of the Final
Judgment sets forth a series of measures by which the plaintiff may
have access to information needed to determine or secure Universal's
compliance with the Final Judgment.
The relief in the proposed Final Judgment removes the contractual
clause that requires the ocean common carrier or conference 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 Universal 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; Liberty Place Building, Suite 500; 325 Seventh Street, N.W.;
Washington, D.C. 20530, 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 interest. 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. Sec. 16(b), were
considered in formulating the proposed Judgment, consequently, none are
filed herewith.
Dated: August 22, 1996.
Respectfully submitted,
Michele B. Cano,
Attorney, Antitrust Division, U.S. Department of Justice, 325 Seventh
Street, N.W., Suite 500, Washington, D.C. 2530, (202) 307-0813.
Dennis E. Szybala,
Assistant United States Attorney, V.S.B. #22785.
Certificate of Service
I hereby certify that, on this day August 22, 1996, I have caused
to be served, by hand delivery, a copy of the foregoing Complaint,
Stipulation, proposed Final Judgment, and Competitive Impact Statement
on counsel for Universal Shippers
[[Page 46488]]
Association, Inc. at the address below: Ronald N. Cobert, Esq., Grove,
Jaskiewicz and Cobert, 1730 M Street, N.W., Suite 400, Washington, D.C.
20036-4579.
Michele B. Cano,
United States Department of Justice, Antitrust Division, 325 Seventh
Street, N.W., Suite 500, Washington, D.C. 20530.
[FR Doc. 96-22274 Filed 8-30-96; 8:45 am]
BILLING CODE 4410-01-M
