Antitrust Issues In The Ocean Shipping Industry

• Pages: 227-259

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CHAPTER IV

ANTITRUST ISSUES IN THE OCEAN SHIPPING

INDUSTRY

Ocean shipping common carriers in the foreign trades are generally

exempt from the U.S. antitrust laws, except as to mergers and

acquisitions, and are regulated by the Federal Maritime Commission

(FMC) under the Shipping Act. Common carriers outside the foreign

trades are subject to limited regulation by the Surface Transportation

Board (STB), and, like non-common carriers in all trades, are fully

subject to the antitrust laws. A comprehensive analysis of the antitrust

exemptions and regulation applicable to ocean shipping will be provided

throughout this chapter.

The chapter is structured in six parts. Part A offers an overview of

the ocean shipping industry. Part B focuses on the history of the industry

regulation from the Shipping Act, 1916, through the separation of the

treatment of carriers in the foreign trades in the Shipping Act of 1984, as

amended by the Ocean Shipping Reform Act of 1998, and the

preservation of some regulation of certain domestic carriers by the STB

in the ICC Termination Act of 1995. Part C analyzes the scope of the

exemptions and immunities. Part D addresses mergers and acquisitions.

Part E addresses criminal enforcement. Part F gives a brief overview of

international competition regimes.

A. Introduction to the Ocean Shipping Industry

Regulation of ocean shipping, including the applicability of the

antitrust laws to carriers, varies depending on the type of carriage

involved and the geographic range in which the carriage is undertaken.

Analysis of the applicable regulatory requirements thus depends in the

first instance on identifying each of these.

1.

Types of Carriage

Maritime shipping is divided broadly into two types of carriage: liner

and bulk. Liner shipping is characterized by regularly scheduled service

between advertised ports. Bulk shipping, by contrast, involves carriage of

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homogeneous unpacked goods for individual shippers, and bulk goods

are almost always carried on “tramp” vessels; that is, vessels that operate

on irregular and non-scheduled routes.1 The bulk sector is itself

subdivided further into the dry bulk sector (including carriage of grain,

ore, and coal) and the liquid bulk sector (including carriage of oil and

petroleum products, liquid natural gas, and chemicals). A useful analogy

is that liner services are like city or interstate bus lines, while bulk

services are like trips in a private car service.

Liner cargo services generally are provided by vessels carrying large

numbers of modular containers that are transported to and from the

origin and destination ports by truck or rail.2 Carriage of larger items

such as automobiles can be undertaken on roll-on/roll-off (ro-ro) vessels.

Bulk vessels, by contrast, generally have large holds designed to carry

homogenous liquid or dry cargoes, and often carry a single cargo for a

single shipper.

The distinction between liner and bulk carriers is important for

regulatory purposes because liner carriage is generally common carriage,

while bulk carriage usually is not. The shipping regulatory regimes that

traditionally have included exemptions from the antitrust laws have

applied only to common carriage.3 In the United States, common carriage

in the foreign trades is regulated under the Shipping Act of 1984 (the

Shipping Act or the 1984 Act), as amended by the Ocean Shipping

Reform Act of 1998 (OSRA),4 which applies to “ocean common

carriers,” and to certain entities that deal with them. It defines a common

carrier as an entity that “holds itself out to the general public to provide

transportation by water of passengers or cargo between the United States

and a foreign country for compensation,” assumes responsibility for all

1. The U.S. Bureau of Labor Statistics distinguishes the two as follows:

“Ocean liner vessels operate by definition via regular schedules. They

differ from tramp and tanker ocean shipping services in that these latter

vessels operate irregular schedules determined by negotiation between

shipper and ship owner and generally carry bulk goods and liquid

commodities, respectively.” Measuring Price Change for Inbound Ocean

Liner Freight in the U.S., Import/Export Price Indexes, BUREAU OF

LABOR STATISTICS, available at http://www.bls.gov/mxp/olfact.htm.

2. See Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 561 U.S. 89

(2010) (generally describing containerized movements under intermodal

through bills of lading).

3. See, e.g., Stolt-Nielsen, S.A. v. United States, 442 F.3d 177 (3d Cir.

2006) (discussing prosecution of tanker operators for bid rigging and

customer allocation).

4. 46 U.S.C. §§ 40101-41309.

Antitrust Issues in the Ocean Shipping Industry 229

of the transportation, and uses for all or part of the transportation a vessel

operating between a U.S. port and foreign port.5 The Shipping Act

expressly does not apply, however, to transportation by “ferry boat,

ocean tramp, or chemical parcel-tanker.”6

As with other modes of transportation, the key to common carrier

status is that the carrier holds itself out to provide service to the public

generally.7 Using the bus/taxi analogy, a bus holds itself out to carry any

passengers who present themselves along the appointed route and pay the

fare, while a taxi is generally engaged by a single party for a single trip

on an unscheduled route. Other relevant factors include the variety and

type of cargo carried and the number of shippers whose cargo is carried

on the voyage.8 Bulk carriers usually do not operate as common carriers,

but are considered as such if they carry cargo for multiple parties on a

5. Id. § 40102(6).

6. Id.; see United States v. Stephen Bros. Line, 384 F.2d 118, 124 n.16 (5th

Cir. 1967) (“A tramp is a carrier transporting on any one voyage cargo

supplied by a single shipper only under a single charter party or contract

of affreightment. The best example of such a carrier is the tanker.”)

(internal quotations and citations omitted). As discussed more fully in the

next part, the Shipping Act applies only to common carriers in the U.S.

foreign trades. Carriers in the domestic and offshore trades are regulated

under separate statutes that are far less extensive than the Shipping Act

and do not provide an exemption from the antitrust laws.

7. See, e.g., Rose Int’l v. Overseas Moving Network Int’l, 29 S.R.R. 119,

162 (F.M.C. 2001) (“The most essential factor is whether the carrier

holds itself out to accept cargo from whoever offers to the extent of its

ability to carry, and the other relevant factors include the variety and type

of cargo carried, number of shippers, type of solicitation utilized,

regularity of service and port coverage, responsibility of the carrier

towards the cargo, issuance of bills of lading or other standardized

contracts of carriage, and the method of establishing and charging rates.”)

FMC cases were reported in an official reporter titled Federal Maritime

Commission Reports (F.M.C.) until 1987, when publication of those

reports was discontinued. The agency’s cases, along with other agency

issuances, continued to be reported in Pike and Fischer’s Shipping

Regulation Reporter (S.R.R.) until that service was discontinued after

2009. Agency issuances are now available in slip opinion form on the

agency’s website at http://www.fmc.gov/electronic_reading_room/

default1.aspx and are also collected in a Westlaw database. The agency

and many practitioners continue to cite to the FMC and SRR reports

where cases are available in that form, and that convention is followed

here.

8. Rose International, 29 S.R.R. at 162.